Things to consider:
Span recording over re-loads/changelevels in a demo. Do not screw up audio sync there.
Add options to seriously embiggen hud elements and texts.
Make sure gamma levels are used properly to the output even in window mode.
Save the video with the same basename as the demo file.
Be able to write avi bigger than 4GB. Indexed if possible.
Have the option to both skip over pauses/console-moments as well as allow capture of the console too (for tutorials etc).
I capture in lossless avi and then simply use ffmpeg to encode to H264 (libx264 using the slow preset) and mp3 (libmp3lame using 192kbps fixed). This gives great quality and is fast enough and small enough for me:
http://www.youtube.com/user/quaddictedAs much as I am against patents and stuff, this is simply the only viable option if you plan to upload your videos to youtube or other hosts that will reencode it. For years I tried with Theora and Webm, thinking that it would be good enough but frankly x264 kicks any encoders ass and since I already made a pact with the devil now (Youtube/Google, Facebook) why bother.
I'd completely drop Xvid/Divx. Surely H264 on a fast profile would be better in any case.