Embedded HD video looks fuzzy on full screen but fine at Vimeo
To embed a HD video hosted on Vimeo, you need Vimeo PLUS or PRO.

From this page:


  Can I make my embedded videos default to HD?
  
  Plus and PRO members have the ability to not only embed their videos
  in glorious HD, but also to default those videos to be viewed in HD.
  This is a sweet way to make sure that your crisp, high definition
  videos are seen in their full glory when they're embedded around the
  interwebs.


They even made a simple diagram to explain it.