Youtube uses the .flv file format, which is not known for its high quality, for their videos.
If you follow the recommendations here
(which you are pretty close to) you may see a difference - just remember: every time a video is compressed it is going to lose a little (or a lot) of clarity so compressing from camera to edited image then recompressing with xVid or DivX the recompressing to .flv is allowing a lot of degradation of video information.
You say your images are razor sharp on your comp - even when you are reasonably close in with focal length? many handycams don't have particularly good lenses for close (macro) work.