I've been looking (for a while) why we can't update to the new youtube.apk with the HD feature. Since the youtube HQ is really a ****ty quality on phones, I tried to get some kind of "real'' 720 p videos.
On my googling, I finally found this : http://forum.xda-developers.com/show....php?t=1529715
It's really better now.
Hope it helped.