I don’t know if this will tell the WDTV to play in the highest definition, but here is a link to the setting which tells youtube to play the HQ videos.
This is what you have to update.
Video Playback Quality
Choose the default setting for viewing videos
O Choose my video quality dynamically, based on the current connection speed.
O I have a slow connection. Never play higher-quality video.
O I have a fast connection. Always play higher-quality video when it’s available.