There's no way to make it use .jpg, you need to use Wolfcam for this. I highly recommend you use it, it doesn't take long to learn and there are lots of great configs around the web. Set it to 1280x720 windowed mode and use /video jpg wav - this will give you jpegs and the sound file which you can sync to it.
The best compression to use is H.264, this is what YouTube uses and it's the reason why people use meGUI which is covered in the last part of the guide. What you need to do is open the video in meGUI and convert it to mp4 (H.264 codec with MP3/AAC audio), then upload that to youtube.



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