They already announced hd support in December.
Demo videos at www.clipstream.com showcase support for full screen HD on broadband, feature length movies, instant access to any point chosen from thumbnail scenes displayed above the seek bar and automatic adjustment of quality to support a wide variety of environments.
From what I understand, you get really high quality if your computer and internet connection is fast and it automatically downgrades the quality if it isn't. The important point is everyone sees something, even if their device and connection are primitive.
Steve said that they can match h.265 quality, but they require more bandwidth than h.265 to get to the same quality. The reason is h.265 is done in hardware with a chip. Not one browser supports h.265 yet, so it could take years for it to get any adoption.
He said the g2 quality is almost identical to flash at the same bandwidth.
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