I read on the youtube forum some tips for creating an SD youtube video from 16:9 footage, so that it doesn't get letterboxed in the youtube player. 

Apparantly the image size should be 640 x 360 or some propotional variation of that i.e 960x540 or 864x486 or (for HD) 1280 x720. It was also advised that only square pixels images should be used. So here's what I have so far: (I shoot PAL).

Down covert using the squeeze option.
Edit on a 864 x 486 (16:9)  timeline.

Youtube likes MPEG4 best, however none of the MPEG4 presets in the Export to File options correspond to any of the image sizes above. 

Should I create a custom preset and if so, with what settings? 

Thanks.