I have no idea about the differences in quality, but the idea of watching it in 1 hour blocks sounds kind of exhausting to me. Keep in mind that the first two seasons (or “volumes” as they call them for some reason) were made up out of less than 5 minute long shorts jam-packed with action. Seriously, a lot happens in these shorts. There is sort of a single story told throughout the first two volumes, at least as far as Anakin and Obi-Wan is concerned, but there’s a lot of filler shorts as well. Volume 3 is much more like a regular cartoon with 20 minute episodes and tells two parallel stories just prior to the events of ROTS.
I don’t know where you can watch it as a series of shorts or episodes as the YouTube versions also combines everything into one movie. However, if the D+ version is anything like the YT version it should be fairly obvious when each short ends and the next one begins.