Recording is a hard task. That's why it's lagging. If you have a second PC you could get capture card and use it to record, then the second PC would lag and not the one you're playing on.
As for photoshop recording, I heard camtasia studio is decent.
How much FPS drops? What are your computer specs? Are you sure your hard drive is defragmented? Are you recording to different or same drive as your game is in?
How much FPS drops? What are your computer specs? Are you sure your hard drive is defragmented? Are you recording to different or same drive as your game is in?