I try to create high quality screencast, (similar to this - www.railscasts.com)
but the quality of the video is bad - the text looks blurry.
Here is my test video - http://www.youtube.com/watch?v=_R4_RhZIyqs
And I also attached a snapshot comparing the output of the capture file (perfect) and the HQ video.

I use kdenlive version 0.7.4 on ubuntu 9.04, I added the following 2 lines to my sources.list file:
deb http://ppa.launchpad.net/dominik-stadler/ppa/ubuntu jaunty main
deb-src http://ppa.launchpad.net/dominik-stadler/ppa/ubuntu jaunty main

FFmpeg version 0.5-svn17737+3:0.svn20090303-1ubuntu.

capture settings: 640x480, frame rate: 15.
project settings: 640x480, frame rate: 15, pixel aspect: 1/1, display aspect: 4/3.
render settings: Lossless/HQ, NTSC, MPEG-4 I-frame only (mp4), force progressive.
The file size is 2.9M and it's 16 seconds long.

Here is the output of ffplay test.mp4: (not sure if it's needed)

FFplay version 0.5-svn17737+3:0.svn20090303-1ubuntu6, Copyright (c) 2003-2009 Fabrice Bellard, et al.
configuration: --enable-gpl --enable-postproc --enable-swscale --enable-x11grab --extra-version=svn17737+3:0.svn20090303-1ubuntu6 --prefix=/usr --enable-avfilter --enable-avfilter-lavf --enable-libgsm --enable-libschroedinger --enable-libspeex --enable-libtheora --enable-libvorbis --enable-pthreads --disable-stripping --disable-vhook --enable-libdc1394 --disable-armv5te --disable-armv6 --disable-armv6t2 --disable-armvfp --disable-neon --disable-altivec --disable-vis --enable-shared --disable-static
libavutil 49.15. 0 / 49.15. 0
libavcodec 52.20. 0 / 52.20. 0
libavformat 52.31. 0 / 52.31. 0
libavdevice 52. 1. 0 / 52. 1. 0
libavfilter 0. 4. 0 / 0. 4. 0
libswscale 0. 7. 1 / 0. 7. 1
libpostproc 51. 2. 0 / 51. 2. 0
built on Apr 10 2009 23:18:41, gcc: 4.3.3

* UPDATE *
When I switch to 640x480, 16:9 (in project and capture settings) the mp4 looks good.
So the issue is only with 800x600.

* UPDATE *
xzhayon helped me and the issue is solved - I had to create a custom profile to render it as 800x640.
I added s=800x600 to MPEG4 and now I have this:
f=mp4 acodec=libmp3lame ab=384k ar=48000 ac=2 vcodec=mpeg4 qscale=1 qmin=1 aspect=%dar intra=1 s=800x600

Thanks for the help!

There is a short howto I guess explaining how to make quality screengrabs. This is rather old, but you may find useful information.

kdenlive tutorial - How to make a tutorial - part 1, using GTK-recordmydesktop
http://www.vimeo.com/2234012

kdenlive tutorial - How to make a tutorial - part 2, using Kdenlive
http://www.vimeo.com/2234012

If you capture in 15fps and render to NTSC, this will double frame-rate. Create a custom rendering profile with 15fps.