I just did a screencast (ironically it's the item just above this one right now- http://news.ycombinator.com/item?id=54774). We pursued your "option 2" initially and ended up doing just the screencast for our homepage demo on jumpbox.com.
I work on a Mac and used iShowU for the capture and edited and produced it in iMovie. Our homepage video is just a quicktime file. For the screencast in the tutorial above I used the Adobe Flash FLV converter to turn it into an flv and wrote a small custom media playback swf to do what you see here-> http://video.jumpbox.com/?app=trac
I work on a Mac and used iShowU for the capture and edited and produced it in iMovie. Our homepage video is just a quicktime file. For the screencast in the tutorial above I used the Adobe Flash FLV converter to turn it into an flv and wrote a small custom media playback swf to do what you see here-> http://video.jumpbox.com/?app=trac
good luck sean