+Max Risk +Mini tuff
It would be nice to have a button to force it, but YouTube has chosen a more automated approach...probably in an attempt to save bandwidth. I don't see that changing.
The playback option in your settings, is for play "high quality" (ie 480p+) when available based on the player size and network connection. Meaning that if you use the small player and have a low bandwidth connection (dial up or low DSL) it will play 144, 240 or 360. If you select the larger player and good connection it will do 480p. In theory if you have a high enough vertical resolution on your monitor, say 1600x1200, your larger size player will actually be much larger, large enough for 720p...combine that with a fast network connection and it may actually play the video in 720p.
The vertical resolution has to be able to fit the 1280x720 sized player, the search at the top, and the description on on the screen.
The "always play HD" option only applies to full screen playback. And even then will only default to 720p if you have the bandwidth.