I'm on Sprint and have the HTC Hero. I have the same problem over here too in Houston, TX. I really enjoy YouTube but I can't watch videos with the YouTube app 95% of the time.
Not to be rude but my Palm Pre plays YouTube beautifully in HQ with absolutely no lag 100% of the time.
I bought the Hero thinking that since Google owns YouTube and the Hero is a "Google" phone, that it would have a top notch YouTube app. This is totally NOT the case. My Palm Pre spanks this Hero all day everyday in my opinion and navigating and switching between apps is WAAAAAAY faster. Yes I'm bummed about my hero...
I guess I should stay with my Pre since it's the absolute best multimedia phone I have ever owned... it plays high quality dvd rips @ 30 frames per second with absolutely NO frame skipping! I'm impressed. No other phone can compare to the Pre's video playback capability and I have owned nearly every pda in the past few years.