This is a free an application called Cycorder. Cycorder gives a better video quality and recording speed than iPhone Video Recorder. Cycorder offers real-time video compression that records video at around 6 – 15 frames per second with no compression delay and supports 384×288 (television 4:3 aspect ratio). Unfortunately it cannot record audio simultaneously. See the details about Cycorder update. For your information Cycorder only available for Jailbreak iPhone. You can check out my post here for those who would like to unlock & jailbreak your 2G iPhone with latest firmware update.
NOTE: By the time i wrote this post, i was on the iPhone 2.0 software update as my title above. Now, my iPhone on latest software update due to unlocking & jailbreaking and still using Cycorder. Until now, Cycorder application still compatible with jailbreak iPhone 2.0 – 2.2 firmware.
UPDATE: You may would like transfer video files after made some video to PC. You can check out my post here on Transfer Files Volume 3.

Install Cycorder via Cydia
Launch Cydia. Select “sections” at haptic menu, select “multimedia” category and go to “Cycorder”. After installation complete, your iPhone will be restarted automatically and get ready to take video!.

interface of Cyrcorder is very simple

cycorder's video file
Recent Comments