So you're talking about the video quality after it's uploaded to YouTube? If the original looks okay before you upload it to YouTube, that is really more of a YouTube issue than anything related to the Flip.
YouTube can be pretty frustrating, quality-wise - we actually had several issues with that during the review, until we ultimately decided to use video.google.com instead. Basically, YouTube has two "modes," a Low Quality mode (320x240) and a High Quality (480x360) mode. However, with YouTube's regular web interface, all videos are displayed at 320x240, even though some of them are being downscaled from a higher resolution video that YouTube has stored. Even when they are downscaled, though, the High Quality videos tend to look way better than the Low Quality ones.
The problem is simply that it is very difficult to tell YouTube that you want to upload a High Quality video rather than a standard one. The uploading system is supposed to automatically detect that you have submitted a higher-res video and create a High Quality video automatically if it is applicable - but unfortunately, in many cases, it just doesn't work and sticks you with a Low Quality version only, no matter what you uploaded.
YouTube's documentation about this is so vague and limited that we were unable to find a way to make YouTube store High Quality versions of the videos we uploaded, no matter what format they were in.
The "moral of the story" is that YouTube is great for sharing videos in situations where quality is not a major concern, but for now at least, if you want the best picture quality possible, you will need to use something else.
Do you happen to have QuickTime Pro on your computer? I'm thinking maybe the fact that I am able to transcode/import videos rather easily could be connected to the fact that I'm a QT Pro user. What version/build of iMovie 08 do you have?
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