Also....
I discovered a method to stream 720p on youtube and some other sites (vimeo, bliptv and some other sites (check flashvideoreplacer's site for what sites work) on a similarly spec'd machine, I will recap (briefly) here for the OP:
Download Tenfourfox 6 or 7 (beta of 8 just was released, method will not work as extensions not compatible). Download CorePlayer for Mac OS X, will cost you 20 bucks, but IMHO its absolutely worth it. Finding coreplayer on mobihands website is a chore, search for previous posts in this forum and you will find links to the download page. Install Flashblock and flashvideoreplacer extensions.
Flashblock isn't critical, but it keeps other flash things from running in the background and chewing up CPU cycles. Control click on Flashvideoreplacer icon, which is at the far right of the address bar. Drop down window will appear, select "Download url", select stream you want, 720p mp4 seems to work best for me. Open Coreplayer, Command U for open url stream, Command V to paste into the window, hit return, 720p will stream. Important to not have any other programs open (sometimes I even need to close tenfourfox) in the background. This mostly works, it still needs to be a decent encode, a few videos do not work, in that case I download the stream and play it back in Coreplayer once its downloaded.
Nova77 discovered similar method using mactubes,start a HD download and then drop that download file onto Coreplayer, and it will stream. Above methods also work for lower quality streams (360p, 480p) in Quicktime and VLC.