Help (v2.7 r316 Xvid) 3d models flicker, example provided

Hello thank you for taking the time to help :)

I have been trying to create a youtube series on an older game called Freespace 2 (available at GOG.com)

This is the best recording I have been able to make:


problem: flicker on 3d models, and hud display.

camstudio: v2.7r316
xvid: v1.3.2 (according to "add remove programs")

Following is a list of settings i have changed:
*Fixed region*
*fixed top left corner: (check)
*left:0 top:0 width:1024 height:768
*drag corners (unchecked)
Record audio from mic, checked (works fine using stereo mixer)
Record thread priority: Highest
Capture translucent windows: unchecked
hide cursor: checked
record to AVI
*Video Options*
*Xvid MPEG-4 Codec
*key frames: 200
*capture frame every: 40 ms
*Playback 25 fps
*auto adjust (unchecked)
*lock capture (checked)
*Xvid settings*
**profile youtube HD 720
**maximum quality slider set to 1 (leftmost)
**quality preset: Realtime
**B-Vop (checked)
**display encoding status (unchecked)

I have tried bvop off, record priority normal
Any suggestions greatly appreciated!
Thanks,
Chris