UPDATE2: HD Hulu video plays decently when windowed. However, you notice some dropped frames, especially when you go to full screen. Still, it's a world of difference. It's actually watchable. I'm not sure if this is due to optimizations or if we are getting true hardware acceleration, because CPU is around 85%-90% with spikes to 100% at times.
UPDATE3: 1080p Youtube doesn't appear to work (example: Zombie Land trailer). The video stayed green with distortions up top. Still, you will now be able to smoothly play most web video, including "normal" HD Youtube. CORRECTION: 720p plays fine. You only get graphical corruption when jumping up to 1080p.
INSTRUCTIONS:
1) Uninstall all old versions of Flashplayer, it's plugins, ActiveX, and adobe downloader.
2) Install graphics driver version 7.14.10.1006 (Vista). If you are running Windows 7, you'll have to change the properties of the EXE file so that it runs in Windows Vista SP2 compatibility mode. That's what I did.
3) Install driver and restart computer
4) Install flashplayer active X and plugin for version 10.1: http://labs.adobe.com/technologies/flashplayer10/
[I also freshly opened and closed each of my browsers at this stage, though it's doubtful that is a necessary step]
5) Restart computer. Now HD Youtube should play smoothly at ~70% CPU utilization after the video has finished caching.
*** CONCLUSION: You'll have to use a slightly outdated Windows Vista driver to get it working without video artifacts under Windows 7. The driver version above is the answer.
Here's a direct download link for driver 7.14.10.2006 courtesy of the Windows 7 Sticky and Josh5183:
http://stuff.josh.sc/aao751h/drivers/aa ... 0.1006.zip
Here's a link to Adobe Flashplayer 10.1 Beta:
http://labs.adobe.com/technologies/flashplayer10/
720p Youtube (Works!)

1080p Youtube (Does NOT Work):

