The quality of your recordings depends on a frame rate, video resolution, compression format.

For the best quality it is recommended to record using Huffyuv lossless codec. If your hard drive is not fast enough then you may use a Motion JPEG codec. After that you may compress your recordings into MPEG-4 ASP or AVC (Xvid, x264,...) using 2-pass encoding.

I didn't really understand your sound problems. Anyway you should connect the source that should be recorded to the input of your sound card. It is highly recommended to record audio with video 'coz synchronization is not a pretty task.

Here is a web-site about Hi Resolution Capturing to Hard Drive with Logitech Fusion Webcam
http://ghonis2.ho8.com/fusiontest5.html

If you have any problems with your web-cam, please contact the author of the above mentioned article. He definitely knows more about your web-cam.