Actually for recording it works quite well. The only issues I've really run into is with streaming, which is likely because that can't be completely offloaded to the GPU like the pure recording can.
It actually can. If you use Nvidia Shadowplay recording and streaming are handled the exact same way. They are both done by the hardware encoder built into your GPU. Of course, Shadowplay only streams to Twitch and you want to Stream to Youtube. Shadowplay also has it's issues. When I briefly messed with it I found out that there was no way to manually name your streams. If I am playing Overwatch it automatically names my stream Overwatch I Powered by GeForce GTX. I watched a couple archives though and the quality was good with no hitching at all.
When I did some research on this I found out that OBS can use the hardware encoder built into Nvidia GPUs the same way Shadowplay does. You just have to turn on NVENC encoding in the OBS settings instead of x264 which uses your CPU to do the encoding. If you did this I doubt you would see any of the hitching you are seeing with your current settings.
The downside to this is that I have read that for some reason the image doesn't look as good when people use hardware encoding on OBS as it does using the same hardware though Shadowplay directly. I don't know if this is actually true but I think it's worth trying if you want to give streaming another shot.
If the quality isn't up to par then a new i7 would probably be the answer.