Try adding this video to your YouTube favorites on YouTube.com. Then go to your Apple TV, log into your YouTube account and see if the video shows up in your Favorites. This particular video is one that has DEFINITELY been converted for Apple TV:
Chocolate Rain by Chad Vader
http://www.youtube.com/watch?v=P6dUCOS1bM0
I'm having a lot of success with YouTube on my Apple TV. I have almost 300 Favorites on the YouTube.com website, and just under 100 of them are showing up on the Apple TV. So, it would seem they have about 1/3rd of their content converted so far, which isn't too bad. New content, videos uploaded to YouTube.com yesterday, are showing up on the Apple TV straight away. For example, there are many videos of the new iPods (uploaded on the 5th of September) which are showing up on the Apple TV already.