Go to Youtube.com in Safari, press the + at the bottom of the screen and add to homescreen. From the mobile site YouTube you have the option to choose HQ videos
You can also use 3G Unrestrictor in Cydia or My 3G in Rock
That's because you're probably trying to watch a music video. Videos that DON'T have the HQ button means that can't be played at all. These videos also won't play in the YouTube app, either.