I haven't read all the posts so sorry if I repeat.
If you're just recording a mission then all you do is record everything. Problem is of course that FRAPS records in WMV format which is a memory hog, and file sizes get unbearable at 100 - 500MBs or more. You simply need a way to edit the footage so you can just start and stop on the interesting bits during a mission, and cut the parts together. You need some type of editing program to make the process practical.
The best is FLASH but it's pricey, and I think you need the pro version to encode to the .swf format. That said, FLASH lets you do a lot of other things but it does also edit shots, and you can make titles and everything else there too. But the greatest feature is being able to code in .swf since a 100 MB WMV can be compressed into a .swf file (while still looking great) that's maybe 4 Megs.
SH3 doesn't easily allow you to create custom camera angles so you're limited to the omniscient view. But a movie in the sense of a bunched of staged shots can be done, but you'll have to do a lot of saving and loading in-game, repeating actions over and over again, collect a lot of footage then edit it together. But in many ways its brilliant and lot of fun.
I've been making movies of my levels for my personal site for sometime and I'm convinced Flash is the way to go. Up to now I've just made movies of my levels' cinematics but the games I work in allow you to make custom camera angles and control the camera's moves. SH3 will always remain a challenge to make movies for I've noticed.
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