For quality settings, I used these parameters I got from YouTube:
Resolution Recommended: Original resolution of your video - for HD it is 1920x1080 (1080p) or 1280 x 720.
Bit rate Because bit-rate is highly dependent on codec there is no recommended or minimum value. Videos should be optimized for resolution, aspect ratio and frame rate rather than bit rate.
Frame rate The frame rate of the original video should be maintained without re-sampling. In particular pulldown and other frame rate re-sampling techniques are strongly discouraged.
Codec H.264 or MPEG-2 preferred.
Preferred containers FLV, MPEG-2, and MPEG-4
Audio
Codec MP3 or AAC preferred
Preferred containers FLV, MPEG-2, and MPEG-4
Sampling rate 44.1kHz
Channels 2 (stereo)
Check out this thread with some links to excellent tests posted to youtube that really shows what limits youtube HD can have .. I'm not sure I understand yet why the "pillarboxes" are always there in Youtube HD or why some of the videos have the 720p and 1080p choices while others do not. Nevertheless, Youtube HD is very good (and free) and I plan on using it!