there are others on here that are looking at making a script to create an mpeg4 video and then delete the jpegs. Mpeg is good for lots of things but not so great for serious security as it is technically not admissable in court as evidence as its conditional refresh based. So you still need jpegs im afraid, or you could wait for jpeg 2000 support
well without getting into a battle of different recording formats only full frame images are admisable. mpeg takes one frame then just records the changes in subsequent frames, thus keeping storage space down, but an individual fRame cannot be used on its own. making a jpeg from mpeg is a modified image so again cannot be used. jpeg2000 gives much greater image quality for a given size