YouTube did, in fact, and maybe still does support full resolution side-by-side 3D videos. I have uploaded these myself, as have other people (here is an example at 3840x1080 which is clearly much better quality than all the frame-compatible videos: http://www.youtube.com/watch?v=xpK7r4G0wYo
). You could upload in any size you wish, provided you had the "yt3d:aspect=16:9" tag. It seems there is actually legacy support provided and this error I was seeing on my videos might just be a bug.BUT THERE IS A WORK-AROUND!!!!
You need to change the aspect ratio, ever so slightly. So assuming you are using a 720P/1080P video at 16:9, use this tag:yt3d:aspect=15.99:9
For some unknown reason, that will restore the video to the way it used to work. They must have some hard-coded check for the 16:9 aspect ratio and are doing something funky. Still a rather annoying bug, but at least there is a simple solution. I have already did this "hack" on those couple of videos I uploaded at full res, and they work fine now. See:http://www.youtube.com/watch?v=NuoGMBv7pl0