Problem 1: I don't know any fix there.
Problem 2: No one uses the demo recording feature, since it's unrecognized by other software and cannot be put on YouTube or anything like such. You are better off with FRAPS.
Problem 3: You should have a graphics card separate from your onboard integrated GPU. I suggest getting a GeForce 6800 XT. It can run BL on all high settings, and also get a total of 1 GB RAM, just in case you want to build big.
