I think I have part of the problem figured out, assuming Action records with Xvid video codec, Minecraft apparently has an issue with this because if you record with software that you can use MPEG-1 there is no issue.

The video link is here http://www.youtube.com/watch?v=j1jBolBFh3U

Here are the settings I have used for minecraft before and had no issue.

The problem is the recording itself. The video seems to be zoomed in a bit and cuts off the inventory bar and the whole border on each side. The recording itself is ok but I have tried everything to not get that cut off effect. I played in fullscreen and recorded in active desktop mode, I have tried...