I used a program to record my screen and I tried to watch it on my two computers. I was very surprised to find that on one of my computers (Windows 2000)whenever the display size is not equal or very approximate to the capture size, the image is of very poor quality (letters become unreadable). However, the recording works great on the other computer (Windows XP) - even if I resize the window to 1/2 of the capture size, I still can read letters.
It certainly isn't related to the player I used because all the players gave the same result.
Media player technology has improved a great deal over recent years - is it possible you are viewing the file on the same player, but on an older version?
Video functions the same way as images in many respects. Asking a media player to resize the movie for you can be troublesome - much like when resizing an image using a browser - the media player will interpret the video and resample the content.
One way to avoid quality loss would be to fix the dimensions of the video file within your page. Another way to improve video quality is to make the initial recording higher quality and stream the file to account for increased file size.