Capture lossless and encoding afterwards is always better.
a) less ressources, especially cpu in use while game capture
b) better base for later audio & videofilters to work with
c) if you use timeline software: Seeking is a helluva faster with a VfW lossless codec like MagicYUV, UTVideo etc rather than a h.264 stream.
d) Encoding afterwards you can spend in a much better encoding settings, because then you dont have to optimize everything to a state that the game stays at playable fps.
e) if it goes to youtube you want to upscale your video if you dont want garbage quality by them. Especially if you capture just in 1080p you will want to use at least 2048x1152 as a upscale, results already in 3x higher bitrate by youtube.
f) HDD too small for lossless? How about buying a bigger one? They're very cheap these days.