The specs are as follows;

• AMD Athlon II x4 640 3.00 GHz (Overclocked to 3.52 out of a possible 3.60)
  
• 2x 2GB DDR3 1333MHz Ram (I think thats the speed)
  
• Windows 7 ultimate 64bit
  
• GeForce 210 1GB
  
• Asus M4A78LT-M Motherboard

I have a tiny bit of lag when I play but, when I do some recording it lags, jumps and all sorts, I thought maybe if I change the frame rate down it would work but I don't know how to. If reducing the frame rate doesn't work could you recommend some hardware that would improve it?

You mean recording in fraps? You can take a framerate hit when recording in fraps. You can try googling for improved fraps recording.

Your graphics card is low-end. If you're looking for improved framerates generally while gaming I would recommend
a better graphics card. What card depends on your budget as well as what case you use and power supply you have.

If you mean changing fps in FRAPS, under the Movies area you can define what fps you want FRAPS to record in by checking the dot with the white box next to it and typing in your desired fps.

If your system runs a game below 30sh fps average to begin with, FRAPS is going to tend to make it slog regardless. If you have a 2nd HDD that you can tell FRAPS to write to that can help a fair amount (don't record to same HDD that's busy playing the game). Partitions on the same HDD don't count.

If you can't get a new card right now, turning down many of the in-game settings as much as possible to increase your base non-frapping game fps may help of course, if you haven't already.

I use Camtasia, is fraps better?

I have not used Camtasia, but looking at their page and what the program was generally designed for, my guess would be yes. Fraps was made with game recording specifically in mind, using it's own codec, and most likely uses less CPU while in use...but it only works with games that use DirectX/OpenGL...eg, it's not meant as a desktop capture program. Altho I hear in Win7 it can capture some Aero stuff, and it will work on some flash video/players.

You'll need/want lots of HDD space if you want to record at full size, and it has no editor function so another editor program is required to piece them together/compress into the final video. You can try it for free (puts a watermark and limits recording time) to see how it does in the game for you, before buying.

I have it but I have no Idea how to use it, would 200 GB be enough to make an hour's worth of videos? and would I be able to use the camtasia editor?

This page might help w/using Fraps: http://kb.speeddemosarchive.com/Digital_Capture
It's easy once you know how it works. Mostly just have it on, set a hotkey and save directory under the Movies tab, start the game, use hotkey.

Using the Camtasia editor - no clue. I suspect it'd be dependent on whether Camtasia "sees" the installed Fraps codec or not. Otherwise I'd suspect it won't be able to read the files. If it doesn't, VirtualDub is a good basic (free) open source editor that will.

200GB for an hour - most of the time but occasionally not. Probably pushing it. Depends a lot on the game and what's going on in the game at any given time, as well as game resolution and all of that. At 1920x1080, full-size, 30fps, 4GB might equal anywhere from 1.5-4 minutes recording time, more or less. Record at half-size if space is a premium.