Record HD videos using VLC

Hello,
I'm using VLC to record a part of my favorite videos so i can upload them on youtube. There's a small problem, when i try to record HD videos i get a crappy quality, however the original video has a very good quality, consider the following video:



The original video, the one that i record this part from is having a very good quality (HD 720p), it's in MKV format and i guess it's x264. Why do i get this quality?

I did the same thing with a non-HD video and it worked better:



What am i missing? How can i record with the best quality? At least a quality as same as the original one?
Thanks in advance,

You can use the extention of opera "safari or firefox" for download the youtube video.

I don't wanna download any youtube videos, i want to capture (record) videos from MKV files and upload them to youtube.