I was so close.
Just days after releasing its APIs and Developer Tools YouTube has finally taken advantage of the larger 1GB upload allowance it introduced in November by quietly launching 'High Quality' versions of its videos.
Not to be confused with High Definition (720p or above) - despite the blatant attempts of the site to do so! - 'High Quality' simply means higher (undefined, but seems to be 480 x 360) resolution video streams will be offered to all users who choose "always show me higher quality when available" in their Account pages. YouTube will decide which videos are capable of this improved quality based on the standard of the original upload.
Why no HD? In the site's own words: "Our general philosophy is to make sure that as many people as possible can access YouTube and that videos start quickly and play smoothly. That's one reason why you don't see us racing to call this "Super Duper YouTube HD," because most people don't want to wait a long time for videos to play."
Apart from the 'Hi Def' logo writing in the promo *cough*
YouTube admits "Right now the Help Center information is pretty basic, but ongoing we'll be making more specific details available for those content creators who really want to tune their videos for YouTube."
Seems fair enough, just stop saying It isn't High Def and waving 'Hi Def' titles all over the place and saying lines such as "Are you happy YouTube is in HD?" As if people are befuddled enough... Sheesh.