IPad 2 YouTube videos are blurry and distorted but were ok on original IPad can this be fixed?

Assuming that you are using the YouTube app and not Safari, then have you tried closing the app completely ? From the home screen (i.e. not with YouTube 'open' on-screen) double-click the home button to bring up the taskbar, then press and hold any of the apps on the taskbar for a couple of seconds or so until they start shaking, then press the '-' in the top left of the YouTube app to close it, and touch any part of the screen above the taskbar so as to stop the shaking and close the taskbar.

If that doesn't work then you could try a reset : press and hold both the sleep and home buttons for about 10 to 15 seconds (ignore the red slider), after which the Apple logo should appear - you won't lose any content, it's the iPad equivalent of a reboot.