Card Capture and MPEG 4

[canteventhink]

i recorded a game in my pc with 1080p resolution,
and as output i used a pc with 768p resolution
the quality is bad even with lossless, because it looks like a 768p resolution video forced into 1080p
btw, i used cheap 10 usd card capture

so my question:
1. it is imposible because the output monitor is 768p
or because the card capture?

2. and is there mpeg 4 encoder in obs?

thank you very much