Well, if youtube clips uploaded at 1080p couldn't be watched at 1080p, people would complain. When services advertise "hd video" and it doesn't actually work in HD... I'm sure you can figure it out. But then maybe you can't, given your remark.
The most attractive feature of netflix is that it is everywhere and most people would not have a problem installing a dedicated app, just look and android and ios.
In Chrome and Firefox, you can't watch Netflix above 720p. It's why I must use IE with Silverlight to watch Netflix at full HD on Windows 7.