Dude, you have to still go for it. YC isn't the "end all be all" of success. Yes, it does suck that you see your idea being implemented by somebody else and that they are getting the spotlight. But on the flip-side, this merely enforces the fact that you are thinking in the right direction. I would also keep an eye on Heyzap to see how successful they become, because that shines a clear light on the potential of what could be for you.

I would also encourage you to look at all the other startups that succeeded after others proved the concept before them...

iFilm vs. YouTube

Snapshot vs. flickr

Friendster vs. Facebook

(anybody else feel free to add to this list please)

Plow ahead...if you truly believe it's a great idea, then make it so but in your own way.