Currently the maximum file size YouTube allows you to upload is 100MB, so that's part of your problem. The second problem is that you should use a better format for compression, like Divx or Xvid. If you have access to Flash software, that would be the best bet. If you compress it with the right specs using Flash (size 320 X 240, data rate of 250 Kbps with MP3 audio at 22,050 Mono) YouTube won't recompress it and it will look much better than most of the poor quality garbage that's on YouTube now.
If you don't have access to Flash software, I suggest you get the Xvid codec (it's a free download from Xvid.org) and go to virtualdub.org and download their free compression program. It's all free open source.
If you need more info, try Googling YouTube video specs. Good luck!
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