It doesn't matter where the recording program is stored, just the physical drive it's recording footage to. You don't want to record to the same physical drive as the game you're playing, more so for HDDs than SDDs, because you run the risk of dropping frames either in-game or in the video. I don't believe HDDs are technologically able to continuously write to one area at a high throughput (and let's hope there's minimal fragmentation separating video chunks) while needing to occasionally read from another area at high burst speeds.
I made a video recently because someone thought I was getting "too many headshots" or whatever, so I tried different encoding software because I've been pretty dissatisfied with the bugginess or low quality of the programs I've tried up to that point and it went pretty well. I play at a capped 121FPS, which I can typically maintain with a GTX 480 and i7-860@3.8GHz. For the recording, I used MSI Afterburner for 1080p30 video with MJPG compression at 75% quality like I have for my last many videos. Video bitrate was around 50mbps. Audio was 4.6 mbps for 5.1. That results in 8.1GB for 20 minutes, which seems fair.
The encoding software that I tried was MeGUI. It's basically a GUI to simplify x264 jobs and other encoding tasks while still giving users control over many useful options rather than have less technical users struggle with or give up on the command line. And I haven't run into a showstopping bug yet. The encoded video's averaged bitrate was 17.2 mbps with 848 kbps 5.1 AAC audio (needed to point MeGUI to the files from here for AAC). That clocked in at 2.6GB, or about 1/4 the size of the original, which is decent IMO. I don't want to type up a full tutorial for configuring this. Look around online if you need a walk-through, but MeGUI isn't much less intuitive than most other software.
These are the x264 options that I configured. You can keep changing the advanced settings of x264 in MeGUI until the representative command line input looks like this (that makes sense once you get in there and start changing things). This probably isn't the "best" x264 config for this type of video--I don't know that much about tuning for the best video quality for a given type of footage--but I did research most of these settings a bit before.
program --crf 21 --keyint 15 --min-keyint 8 --b-adapt 2 --b-pyramid strict --qpmin 10 --qpmax 40 --qpstep 3 --vbv-bufsize 50000 --vbv-maxrate 34000 --direct auto --output "output" "input"
My critiques of my final video on YouTube are general blurriness in the distance and a fair amount of blockiness and aliasing if one pauses to inspect objects' edges. Special effects from powers and the like greatly exacerbate the issues, but most of this is not exactly easy to notice if one doesn't pause the video. Comparing your video to mine, I'd say mine has less blockiness on simple, static objects whereas all your blockiness is less severe than mine. You win hands down on aliasing. Also, I think your special effects preserve more detail and contrast whereas mine are less distinct and fail to capture subtle changes without looking like a mess. The Vorcha's red aura from Bloodlust is striking. I'm sure recording at a higher FPS improves video quality at every stage in the publishing process, particularly in giving encoders more frames with fewer changes between them to minimize crappy guesswork.