So, grab the embed code from YouTube and remve all excess code from the base URL for the video, beginning with the ampersand '&'
e.g: You should have something like this remaining: http://www.youtube.com/v/wGugqIb5880
Now, add the following code to the end of the URL: &ap=%2526fmt%3D22
the 22 represent the 720p
18 is for the high quality version (not HD version).
The video below is being displayed at 960x540 in order to fit it into the space. It will however display in full resolution.
Watch on YouTube: http://www.youtube.com/watch?v=wGugqIb5880&fmt=22