Credit to Daniel-B for his reply to Youtube-HD-On-PS3-For-Free-Is-It-Possible? here: forum.videohelp.com/threads/330336-Youtube-HD-On-PS3-For-Free-Is-It-Possible. Hope that this may help people here.
There are presently no web sites that allows you to watch HD YouTube videos in the PlayStation 3 Internet Browser.
As demonstated by in the past, the current PS3 browser and Adobe Flash v9.x are capable of streaming 720p YouTube videos flawlessly (without the video stuttering, after a few seconds). Aiuati, which is Flash only solution, stopped working after YouTube made some changes to the site, most likely in an attempt to prevent video downloads. The site is live today, but viewing videos doesn't work.
Due to the lmited amount of memory available for the browser / Flash, 1080p video playback is presenly not possible and will typically crash the PS3, as demonstated in the past by Adobe's own video test page.
As you've found, the highest resolution PS3YouTube uses to stream videos in the JW Player is 480p (YT format 35, FLV)).
I actually wrote a script that allowed me to switch to the 720p stream (format 22, MP4) on PS3YouTube, but because the site features Flash adverts, which hog some of the available processing power, the results were rather variable. This is probably why jaqb has chosen not to actually stream HD content, even though the title on his site states "Watch HD YouTube On PS3 What size of TV are you using?
On my 40" 1080p 120Hz Samsung TV I actually find 480p playback is perfectly acceptable for YouTube videos, as there are very few that truly benefit greatly from actual HD. An exception is the excellent Home movie, which must be watched in HD to be fully appreciated and for this you can use PS3YouTube's download feature.
If you are a serious YouTube user, you'll also want to check out the bookmarklet in conjunction with the standard YouTube site, which allows PS3 owners to have a far richer YouTube experience than YouTube XL or PS3YouTube alone (uses PS3YouTube for video playback).
Hope this helps to explain why your ps3's are freezing up, 480p across the net, and using jw Player that youtube use to stream Hd is pushing it, and what this plug-in is, is a way of using a different swf player that can stream at a higher bit rate, but using YouTube's feeds. ps3youtube.com
To quote: MUZU TV is an Irish owned interactive music Web site featuring free music content legal video sharing Web site. Co-founded by Ciaran Bollard and Mark French, it was launched in Ireland and the United Kingdom on 16 July 2008. Seven million videos were played monthly and there were two million users within one year of the launch, with users creating their own TV channel.
Note: In the first image you see black/white images, it is because I was using VirtualBox, on PS3 they are full of colors.
HD support (about 90% of videos on ps3 work with this setting)
Limit number of entries per request (default is 150, it is used to avoid memory fullness and possible crashes)
Browse for videos in any genre or in a specific genre(e.g.: rock)
Top Charts from Muzu.TV
Top playlists from Muzu.TV
Browse for videos from an artist (using search box in Showtime's homepage, you need an external keyboard, there is no Virtual Keyboard yet supported in Showtime)
The plugin is not available yet on Plugin Central but should be very soon. At the moment you should install it putting the ZIP file (UNextracted) in the folder settings/installedplugins on Showtime folder (in FTP).
Note: If in any video it shows "Cpu is too slow..." or "Cell forcing level 4.2...", it is handled by Showtime not the plugin.