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Redi-I,
Try a smaller aspect ratio. Instead of 320x240 try half that and don't rotate it. (160x120). Start with the basics and then work your way up to a custom encode. Start with a fresh boot of the PC and only open the programs you need. Try encoding at 100kbps. These settings should be in the safe zone. The quality will suck but you need a starting point to build upon.
LFNNS
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