breaking_b
Lurker
I have the same problem on my Eris. I can't play any videos if I use the YouTube app, but if I go to the actual YouTube website I can play videos.
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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.
I'll buy it for $12.50 since you hate it so much.My Hero's keyboard is lagging or else I could say more. It's for sale by the way. LOL.
"See? I told you I'm not crazy. These phones are buggy as hell," I said to him. "Now I'm a little freaked out about my phone," he replied.
Good. He should be. 
However, after 3 handsets, all of which have acted up, lagged, exhibited strangely sporadic behavior, and have simply failed to instill in me ANY confidence in their long-term reliability...well...I'm not pleased with HTC or their Hero. Not. At. All.Considering that multiple phones are having this issue i would suggest is is a network related outage. And the host for youtube to push over sprints network are possibly in the same place the large amount of snow fell? Call me crazy

Mine started working again today, tried several videos and i notice that the videos default to high quality now, and when I hit more the option is to switch to normal quality now. I just hope this persists.