Provided the next gen have better cooling, I would imagine 1080p would play back be fine. Remember with YouTube to make sure that you're using the HTML5 version instead of the Flash version.
My HTML5 YouTube, in OS X on the MBA, has been much improved over Flash YouTube.
Remember OP, Flash is a plug-in to the browser. The MBA is completely capable of both 720p and 1080p, but you have to run video in a native application not within a browser. The "plug-in" is the key. When running a plug-in Flash, there is no h.264 hardware benefit (Apple's Jobs doesn't like Adobe). If you download videos and play them in QT, Plex, VLC, and etc, you will be fine. YouTube works best with HTML5 in OS X, and it's always going to be that way.
Apple feels threatened by Adobe, and Flash is a threat to Apple's business model. Jobs will do all he can to rid the world of Adobe, even though to the end user both Flash and HTML5 have proven to have the exact same results when both have access to h.264. Only Apple's Jobs could single-handedly destroy Adobe's Flash "status" as an Internet standard... the entire web is filled with Flash whether Apple likes it or not, and asking a few media companies to change everything for the iPad/iPhone OS is one minor piece of the puzzle. However, we're going to have Flash websites for a long long time... small business and entrepreneur websites aren't going to change anytime soon. And everyone with Flash skill-sets have wasted money on college and their whole degree because Jobs doesn't like Adobe. The whole situation is SICK! And it just proves that Jobs only cares about shareholder number one, himself.
I would have a lot more respect for Jobs if he just was honest about Adobe being a competitor and a threat rather than publicly bashing Adobe every other day. Sorry for the rant, but the whole situation is sickening to me. How Jobs can single-handedly change the web for an iPad that doesn't even have 1/10th of 1% of the Internet browsing space yet and will not for several years.
