I also have encountered this problem. I am using Iron, and YouTube started only offering me the 360p option on HD videos. I go to other browsers such as Firefox and IE and the HD options work.
I found a solution that worked for me.
I downloaded "You Tube Center" and under You Tube Center Settings >> Player >> Player Type I selected "Flash" instead of "Default." This allowed me to once again watch in 1080p. I toggled back and forth and checked each time and every time I had "Default" selected only 360p was available, and every time I had "Flash" 1080p was available. Hope this helps!