YouTube will ALWAYS re-render your upload. So to an extent, you should upload in the best quality you can afford. The limits aren’t crazy… YouTube (last I checked) will take up to 2GB of upload, and unless you have a Director’s Account (which is no longer available, but if, like me, you applied long ago, you still have this), you are limited to clips of 10min or less.
YouTube will handle many formats, but it’s pretty AVC friendly. For anything online, you want progressive video if you have it. Knowing the limited bandwidth, I tend to render to 24p or 30p, depending on how it was shot. For 720p, I usually render AVC at 6Mb/s… YouTube’s 720p runs around 2Mb/s, so you may not get much better video with a higher bitrate, but it depends on the material.
I did a couple of 1080p uploads last summer that passed whatever test YouTube does to give you 1080p back… these were encoded at 20Mb/s using the MainConcept VBR encoder (the Sony encoder doesn’t do VBR and doesn’t do 20Mb/s). They looked pretty good for YouTube, but once you get to 1080p, YouTube is generating a video rate many clients can’t stream (even when you have 10-12Mb/s service, you may not have a clear path to YouTube’s servers that can maintain 6Mb/s or whatever they’re running for their version of 1080p).
-Dave