How are you DLing it? Becuase if you go to the "Video Manager" section, click the arrow below the video on the listing you want to download, then hit "download MP4" and it wil lsave the video onto your computer in 360p. I originally edited videos with Window Movie Maker, but I hate that program and it letterboxed everything, so I switched to Videpad since I'm very familiar with Wavepad (which I love), and it's been great (also free!).
That should keep you video in "flawless" 360p, even when you re-upload it.
It doesn't work with my youtube account, so I have to upload it to a separate one, then download that video to my computer so I can put it on my account - and it gets downloaded in 240p :|