Jason Kottke has a very informative post on how to watch and embed quality youtube videos. The hacks on how to watch high quality videos have been well known even before youtube officially launched the high quality videos. But the hack for embedding a high quality version is something that is not widely known.
For embeeding a high quality video add &ap=%2526fmt%3D18 onto the end of each of the URLs in the embeddable code that you get from YouTube.
<object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/MuqiGrWBRqE&hl=en&fs=1 &ap=%2526fmt%3D18"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/MuqiGrWBRqE&hl=en&fs=1&ap=%2526fmt%3D18" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="425" height="344"></embed></object>
This will not magically convert every video into high quality. Only those videos which youtube has converted into high quality will work.