Exactly. The term 1080p is basically ubiquitous, and you can clearly see the numbers escalating to that would indicate some sort of quality progression.

Maybe they are catering to the folks that are so technically uninclined that they don't understand basic quality settings, and at that point why would they care if the default setting isn't good enough? Leave it to default to auto-resolution and give the user the choice to what quality they want if they care enough to change it, instead of making them constantly have to change it back.

You don't have to be a videophile to see the difference between 360p and 1080p, but apparently YouTube thinks they are both good enough for the average idiot.