If the resolution of the video is smaller than the Sequence window one of 2 things could be the cause;
1. The Zoom level of the Window might be set to something other than “Fit”.
2. Your Sequence preset was for much larger video.
AVI is just a container, not a codec. I suspect you rendered as uncompressed which wont play smoothly on most computers, but should work fine after exported.
One challenge with screen capture involve the export codec. I use Camtasia and export using the free Lagarith codec and edit in Premiere.
Other challenges for you are the screen resolution of 1920 x 1280. I suspect you will have hardware challenges with that resulting in a very low frame rate if even 1 frame per second.
I have used Hypercam but have not tried it with the lagarith codec.
You can drag the entire work area bar by it’s center, drag the ends, but the easiest way to position the ends where you want them is to position the CTI at the beginning or end of the part of your movie you want to export and press Alt+[ or Alt+]
On a PC with the Timline as the active window;
File>Export Media
In the Export Settings Window, choose Microsoft AVI as the format and then the appropriate Preset.