I read a tweet from someone producing the game a while back that said the theater would be very similar to Black Ops Theater but it won't have frame rate issues.
I'm not sure if that means better quality while recording or not since I'm borderline computer illeterate, but I'm guessing it can't hurt the quality of videos rendered from theater mode.
Stream & share your finest Call of Duty® moments.
Upload & Share 30 Second HD Videos Online
Go big with your video uploads, with 8x more HD video capacity.
4x User Storage of Match Replays & 2x Video Export Length
Two things to notice here:
1. The upload quality is "HD". We will see just what resolution when the game is out. I'm hoping for 720p at the minimum.
2. ELITE Free users can upload 30 second clips while ELITE Premium users can upload 1 minute clips. This means you cannot upload a full game until you do it in a bunch of 1 minute clips.
If you want to upload full games in high-quality, then you should invest in a HD PVR.
From what I understand, the upload quantities relate to the direct link to youtube, and not file share like in black ops. So users will now be able to upload directly to thier youtube account in 30 second clips, or if you have Elite membership you get 60 second upload limits, all in 1080p, although youtube currently only allows uploads to 720p.