YT app will play videos fine for me (in hi-qual, too esp after the update and new Class 6 SD card). But it doesn't want to load my playlists after a certain point, and eventually will give me a 'no network connection' error, even when it just played clips fine with a strong WiFi signal (tested on 3G and WiFi... since my 3G signal is -97 most of the time, it woke right up and chugged away after the radio was turned on... for about ten minutes, then locked up in a load state).
Another annoying fail in the YT app, is when I'm swiping through a playlist, it'll list one video randomly over and over again... before of course locking up. Oddly enough quality is not my primary issue.
I just trade off watching hi-qual, for playlists that actually load, with the HTC browser using the m.youtube.com site (Touch doesn't let you do enough, the Desktop site too large). The Dolphin browser, despite its other features, won't play *any* YT content for me, regardless of HTC browser or YT app, 3G or WiFi... so it got uninstalled. Good app, but that and one other issue was a deal-breaker. Not sure why my experience is so different.