Youtube will recompress with their own encoder if your file isn't within their parameters. I don't know if they've changed it, but it was something like 320x240 and a max of 350kps for video AND audio. That might have changed with their new player, I'm not up with all that stuff. Actually, there seems to be some differences of opinion on the 350kps thing but I remember reading some forums where some guys were doing detailed tests and I thought that was the number they came up with..
In order to get the best possible quality, you want to knock the audio down as low as possible, mono, 22050 and 32kps or even lower. Then you want to do a 2 pass video converion to squeeze the best quality out of your remaining 318kps. I don't know what the frame rate requirements are on youtube, but you definately don't want to be converting at anything higher than 15fps and a keyframe maybe every 5 seconds or longer so you can have more data for getting more quality out of it. Those are what I'd start testing with and then go from there.. The links below might have some better info.
http://www.funtechtalk.com/how-to-gr...load-settings/
http://blog.jimmyr.com/High_Quality_...be_11_2008.php