From the sounds of it, it seems you are recording at "half-size" in fraps. When you open Fraps go to the "Movies" tab and make sure that the "Full-size" is the marked one.
If it is set at "Full-size" then it is the render settings you are using to export it out of Video Edit Magic. There may also lay another problem, I have not used Video Edit Magic so I do not know anything about it but it sounds like one of those programs that comes with a camcorder you buy from the store. If it is anything like those programs han getting the quality you want from the recording is most likely not possible.
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