One thing I had noted, is that it is better to save your audio stream seperately, and process it outside of Virtualdub, then direct stream copy it back in, if you wish to have a stereo recording.
It seems that things don't play nicely, if you let virtualdub encode your audio as well as the video, more steps, but the quality is that much better.
More or less, in virtualdub, Follow all of the steps related to video. For audio, go into file, "save wav...". Save it somewhere. Use MP3 encoder of your choice on that wave file, something like
audacity. (You have to also get lame_enc.dll from somewhere.), Then once you have the MP3 encoded, back under virtualdub, Under audio, select "Audio from other file...", And select the MP3. Also under audio, if not already selected, select "Direct Stream Copy".