Uploading to YouTube and using that as the source on your site is not a bad idea. You are then, to some extent, letting them (YouTube) take care of video formats, compatibility issues and such...
I quite like 'Video Lightbox', using either YouTube or uploaded MP4 as source. It is very easy to use and takes up only as much space on your page as you want to give it.
I have an Video Lightbox example of an uploaded MP4 (HD) here: http://www.mingas.com
(on the left, just under the main menu...)
...and a number of others, using YouTube as source, here: http://www.mingas.com/video-clips1.php
(I wouldn't blame YouTube for the low quality of many of the videos on that page! They are just low-quality sources from my end, due to their age and use of inadequate recording equipment... They are included for reasons of 'historic interest'...

www.mingas.com