flv and mp4 are only containers

flv contains some flash-specific codec, and mp4 uses h264 AFAIK.
boyiee, do you upload the raw fraps files to YT? oO must be a really good connection you have there... it's probably that YT can't handle the fraps codec that well and that's why the videos don't look fancy.
fastest way should be that you just re-encode the videos with handbrake to h264/mp4. that could even speed up the encoding process at YT. oh, and you might wanna try to record in 25fps instead of 29,something.
depends on what features you need. pretty much everyone uses sony vegas or adobe premiere, but they'r expensive as hell when you buy them...
a free (open source) and pretty powerful editor is lightworks. complicated at first because it has its own way of working, but once you get that it's quite ok. only problem is that it's really picky on video formats you can import, dunno if it can handle fraps raws.