I had the same reaction upon fireing up the game on my PS3... it looks awefully aliased compared to all these great videos I've been seeing on the net.

I think the answer lies in going to the display options of your PS3 and manually removing the 1080 options, so that the game will run at 720p. GTA IV on the PS3 outputs at 640p, so that if you have the 1080's as options then the PS3 will automatically scale its output to the best option available, usually 1080p, depending on your TV. With those modes out of the equation, the game will only stretch up to 720p and will look a lot better.

Of course, this means that if you have a game that outputs at a higher res than 720p, you'll have to get in there and change the display modes back. A pain in the ass, but better than having Liberty City look like a jaggie mess!

I highly recommend SnagIt, it's everything I need in a screen capture program, and I take a lot of them. It has video capture as well. The feature I found most useful was an automatic, timed mode that will take snaps effortlessly in the background while you play.

http://www.techsmith.com/snagit.asp

There's a trial mode, so check it out.