Alright, I’ve managed to sort of troubleshoot my way out of this. I switched the DXTory codec and that stopped the lag, but made the videos over saturated. I messed with settings in Sony Vegas and managed to fix it so everything is good now. Here is a video with everything set up properly:
I fixed it. If I render in WMV instead of MP4 it works as it should. I was using MP4 as that was what somebody on the internet recommended for gameplay videos.