1) There are no major problems, just unnecessary colorspace conversions: full range RGB(screen)->full range YUV 4:4:4(fraps encode)->full range RGB(vfw fraps decode)->tv range YV12(avisynth).
In case of RGB lossless you'll have RGB values preserved exactly as they were. Fortunately, fraps has no issues with chroma shifts etc. as it processes YUV<->RGB naturally inside codec. Outside fraps always looks like RGB.
2) You did it right.
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will this automatically make the video in 16-235 levels?
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Yes, it will.
3) Level is not really needed. Youtube eats default (unrestricted) settings just fine.
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Anyway, it seems that my comp isn't capable of capturing lossless RGB at 1080p after all, the frame rate can sometimes go under 30, but at YV12 capture it never dips under this.
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Youtube tends to resample movies with more than 30 fps, it produces blending of frames. Looks terrible in stops and produces unreadable flying texts.
In my eyes best bet (
sorry, can't avoid this word) is 25.0 or 29.97 fps in fraps without v-sync, then only preserve fps in processing line. You may use more fps for video effects like slowing down some moments, but it's not needed in your case. So don't waste disk space and processor power - set up fps suitable for youtube from very beginning.
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Is there any way to convert to TV levels without converting color space?
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No, not with stock fraps decoder. Besides, as you said, it's looking good anyway.