Couldn't locate decompressor for format 'FPS1' (unkown)
VirtualDub require a Video For Windows (VFW) compatible codec to decompress video.DirectShow codec, such as those used by Windows Media Player, are not suitable.

Why is the AVI movie generated by Fraps so big? How can I reduce the size?
 
The filesize is big because there isn’t enough time to encode the movie while the game is running. The movie frames are slightly compressed, but still require a large amount of disk space due to the high resolutions. Once you have finished capturing you should convert the saved AVI into one of the popular compressed movie formats such as mpeg or divx. Recommended programs for doing this are tmpgenc (Tsunami Mpeg Encoder), and VirtualDub.
 
Using VirtualDub is quite easy. To create a compressed version of the AVI follow these steps:
 
Start VirtualDub  
Select File->Open and choose the AVI in the Fraps directory you wish to compress.  
Select Video->Compression and choose the codec you wish to compress with (usually divx)  
Select File->Save As AVI and specify a filename for the new AVI.  
If you have Windows XP you can also use Windows Movie Maker to compress the video files. If you use Windows Movie Maker it's recommended that you keep your Fraps video files at 800x600 or under.