Well I can't really blame Youtube on this one. From what I can see on the AVI you linked..
Your video itself has issues.
The Codec and bitrate your using If MPC is reading them correct are not the issue (I record all of my 1152x720p YT videos with H264, SinglePass 3500 Bitrate) Yours claims Video: MPEG4 Video (H264) 1280x720 30.00fps 6031kbps
I think just the way the game is rendered is causing the most damage. I know your using OT's built in recorder so that MAY be the issue but more likely its just the way the shaders are causing insane pixel fluctuation.
Go back to the heli in-game and take a screenshot similar to the closeup I posted above. Rotors spinning, similar lighting etc. If those blocky shaders are still there then it isn't your recorder. Although I would like to see the difference/performance hit recording with FRAPS would incur.