Recording software that won't reduce quality? ... Sure, but how much disk space do you want to use?
The "best" way that I know of, would be something that grabs lots of individual screen shots -- so that each frame is an intact picture. This is basically what "motion jpeg" does -- a bunch of jpeg images of your screen, one after another, and it's as good as jpeg is.
But ... that's a LOT of space. There is a lot of duplication from one frame to the next. Hmm, what if it were possible to say "This frame is almost like the last one, except for X". Well, that's what the various video compression programs do.
Now, the question is: Do you have the CPU power to play minecraft and compress your video in real time? If not, then look into a two-step solution: record in motion jpeg, and after recording, compress it down. Benefit: Since compression is now not real-time, you can make a much stronger compression.
But if you are asking here, you probably want to stream -- which requires real time compression. Minecraft will basically use two full CPU cores (more or less), and if you don't have at least a 2+2, or 3 core CPU, you probably won't have the power to do it.
The issue of converting from one color space to another is entirely different. In theory, you should be able to compress images and not alter the colors. In practice, I see the same "blue turns purple / orange turns red" effect normally seen on printers every time I do a compression (and the color accuracy, more than video quality, is the compression limit for me). It's the same issue with La*b* color space not being a perfect "same angle is same hue" -- the conversions/compressions seem to keep the angle constant while altering the distance out along that angle. A really good explanation is at
http://www.brucelindbloom.com/index.html?MunsellCalcHelp.html#BluePurple
