fraps and xfire
www.fraps.com
fraps only has a watermark if you don't buy it and will only allow you to record videos for 30 seconds
xfire is an ingame chat program but you can set it up to record video and you can choose which inputs and outputs to use for the audio.
as for the music effects there are several video editing programs that might be good but i personally don't know of any at the moment.
He asked for a recorder with no watermark.
www.xfire.com
Yes but i'm pretty sure xfire doesn't do xfire in-game for toribash anymore.
Try videopad, if it's a trial version, go NCH software folder, then videopad, then uninstall and change it to freeware version.
Hoped this helped :3