Originally Posted by Kyuki
is it meant to be this way? That the picture quality decrease this much just because you lower the size? (the diffrence is huge).
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I'm afraid it is, yes. If you lower the resolution in WoW itself the game's rendering engine will downsize and filter all your UI elements for you (such as the font, the buttons, unit frames, etc...), using algorithms like anti-aliasing to ensure you can still read the text and make out crisp edges of UI elements.
However, due to performance limitations, FRAPS only performs a very very simplistic downscaling, most likely (without knowing the actual process, but its a pretty good bet) just taking a 2x2 pixel area and approximate it's color contents to a single pixel. You can imagine what that does to fonts / text.
So yes, if you let FRAPS do the downsizing you'll only get results like that. A possible workaround, if you can afford recording at full size, is to let your video editing software (or VirtualDub) take care of the downsizing. They usually offer much more sophisticated algorithms (Bi- or Trilinear filtering, etc), the resulting text display should be much more crisp.