I never tried a full screen capture. I was trying to keep file sizes as small as possible, so I just used the BW window or defined a small region.
As noted, I also ended up using the high quality in order to be able to read the text.
A few things to try:
1) On playback, enlarge the Windows Media Player (or whatever you are using). It seems to scale rather well.
2) I have no idea why, but the videos actually look better if you use IrfanView instead of Windows Media Player. IrfanView is a free, downloadable image viewer that handles a ton of formats including WMV.
3) The only other thing I can think of is to use Windows Magnifier (built-in to WinXP, free accessibility tool). Float the window and size to your BW screen. When recording, define a region to include BW and the magnifier window. Here's a short example.