The native resolution for Youtube widescreen is 480x360.
It is also possible to upload HD videos which are 720x1280 but these only show in HD when &fmt=22 to the end of the page URL
I discovered that if I put my digital still camera on movie mode and set it to high quality it give a 640x480 image. If I change the settings to 16:9 mode it gives me 848x640 and if I upload the .mov quicktime file straight to youtube it fills the full wide screen area and gives the option to view in high quality.
Click Here to see the example video (the embedded player is not widescreen so I can't embed it in this page).
I have not tried editing any of the 16:9 files and then uploading them. I suspect that this might cause me to lose the view in high quality option depending on what format I save the edited file as. I need to experiment more with this.
The camera I am using is a Leica C-Lux 2 which is similar to the small Panasonic Lumix compact with image stabilisation. The high quality movie setting gives me about 10 minutes on a 1GB SD card with sound. The quality is sufficient to put onto a DVD using DVD Flick and even on my 40 inch TV its not as badly pixelated as I would have expected. On a smaller TV its fine and the camera is so small its easy to take places. It also has a carrier on the strap for additional SD cards so its gradually getting used more and more for video.
I suspect that my small Nikon compact would give the same results although I have not tried it.