Greetings,
I have a wireless X10 camera that I received at Xmas but I haven't really played with it much yet. Having said that the only limitation on file size is just shy of 4 GB for FAT32. There simply aren't enough addressing bytes to go beyond this limit. If I recall correctly this limit doesn't exist for NTFS but I don't recall the specifics.
More back on subject. I have used Microsoft Windows Media Encoder V9 to record from a video capture card getting the SVGA feed from another computer. The files have been rather large encoded in WMV format and represent several minutes a data. The idea was for software demonstration fodder at trade shows and the like. This works fairly well and you can could conceivably compress the video using a DirectX compliant encoder filter, e.g., AVI, MPG2, etc. You can download the WME V9 from the Microsoft website for free. Perhaps V10 (or V11) is now available.
I'll try this myself sometime and post anything useful that I find.