I ended up buying Bandicam for just under $40, but if you don't mind a watermark at the top of the video that takes up 40 pixels vertically (not sure horizontally) and if you don't mind that it has a 10 minute cut off (you can begin recording again immediately after it stops, it will just start a new video), then the free version of Bandicam is perfect. Though I expect that having to do an LP in 10 minute parts would be a pain, or it wouldn't work so well if you pieced them together into one video, having a short bit missing between each 10 minute video. Nobody really enjoys that kind of thing when watching an LP.
Btw, NEVER get Fraps, the video quality is great but it is way bloated in size, it lacks many options (like changing the video capture quality to lower video size), and it can slow down games much more than other screen capturing software like Bandicam or Playclaw. If you buy screen capturing software, you're probably looking at about $40. It was worth it for me, because I will be using mine a lot very soon for various projects and for LPs, and I will even be using it for business later down the road.
I chose Bandicam because it can record anything. You can select a target application that is running or you can capture a custom-sized part of the screen, and you can actively drag it around while recording without any lag whatsoever. It's also got all the options you will ever need to get the right quality and size of video and audio that you are looking for, etc. It also takes screenshots.
Camtasia Studio 8 is super nice and professional, but it just isn't something the average LP'er would use, as it is $300 for the full version. So, for long term, you'll need to get something else, unless you (or your parents) are loaded.
As for XFire, it is very limited. If you want to record some of the more obscure titles, you are out of luck, since it only supports certain games. I should note, however, that it does support Cave Story+ (but not the original). It will record most every AAA title that you'd want to record, but as far as most indie games go, you won't be able to capture them, unless they are very popular.
