Update: Version 1.4 released.

1.4 Changes:

  • Fixed the fullscreen glitch

1.3 Changes:

  • Is now compatible with Firefox 3
  • Made the status-bar menu simpler

1.2 Changes:

  • Removed bundled VLC Portable and Wimpy
  • Added stop button preference for Flowplayer
  • Removed .flv extension for flow player as it sometimes stuffed up the stream (you can still download the video as an .flv)
  • Added a restore function that restores the original player for the current page

Download here: http://forboden.com/js/youtubealternateplayer.xpi
Or here: https://addons.mozilla.org/en-US/firefox/addon/6522

Description:
This extension replaces the default youtube player with either flowplayer (pic below)

or JW FLV Media Player (pic below)

You have the option of selecting which player to choose from within the extension preferences window:

You can also download and save the video using the status bar menu.