This topic has become somewhat obsolete. YouTube updated their player so that embedded videos now have the options to change the quality settings for them. But the basic principles still apply about how You Tube selects video quality based on your connection speed. You can still get to 'Playback Options' as shown in this video, although the choice of options has changed.
Note: Make sure you have the latest Flash Player installed on your browser. Especially if you want to watch HD videos.