Some of the slowdown you see is due to FRAPS itself dumping a huge amount of data to disk. I recorded at 1920x1200 (yeah, that was overkill). With FRAPS off, I get about 25-55 FPS at this resolution (with hesitations when chunks load). But, after a large number of chunks get loaded, the frame rate can then die at times. Which gives you some time to buy more RAM.
Oh, machine stats: NVIDIA GeForce GTX 480 with 1.5 GB memory (and 6 GB CPU memory, Intel Core2 quadcore Q9450 at 2.66 GHz). The bottleneck is definitely loading chunks and video memory - the thing soars when the visible chunks are all loaded. Also, I kicked the maximum view distance up to 1200 meters, considerably higher than the default (and much higher than Minecraft's wimpy 150 meters).