[papagirafe]

A compressed source video needs to *expanded* to full frame/framerate in real time to allow editing in Reaper (or any video editing app).
On the output side video compression is mainly achieved by calculating pixel differences between "key frames" and by using mathematical and statistical wizardry. For maximum compression you need a near complete view of the final video to find the best keyframes and to collect statistical information. Since the final video is being generated in Reaper you clearly do not have enough information to fully compress, hence the suggestions to use Handbrake (or similar) as a second step to further compress.