It's the encoding to MPEG2 after editing that reduces the file size down.

The avi file resulting from capture stores each frame in it's entirety. MPEG2 format stores key-frames in their entirety (about every 15th?) and then subsequent frames just store the bits that change. Hence the file size is much smaller and a manegable.

Personally, I'm still struggling with the idea of what to backup because the file sizes ARE very large during intermediate stages of editing. And deleting the original capture stops you revisiting a project to make that 'Director's Cut'!