Ok, "check it out dawg - it was a little pitchy."
I've noticed something here. My mom has an iPod Touch first generation and it only operates on Wi-Fi. Now, we have a d-link router, I think wireless n capable but the iPod works on the wireless g signal. I've changed the router to a wireless b signal only and it works! Yeah, maybe...
Here's how it works:
The iPod Touch is only a Wi-Fi capable device.
I have an iPhone 3G and am experiencing the YouTube slow issue. So changing the wireless signal to be only works to a point. I guess it's better than the ridiculously slow nature of the g... or is it? Well, the answer is yes, the YouTube videos do work much better over the wireless b signal, still the videos do not load like they have.
I've gotten great load times before... but it's sketchy at best. This 3G was loading videos over 3G better than Wi-Fi. The key word is was...
Notice that my mom's iPod tends to work better than mine, I mean I get full streaming YouTube videos on that iPod without any problems... EVER.
So what's the commonality? Wi-Fi... The iPod only has Wi-Fi, so wouldn't it be a shot in the dark if I could make it so the iPhone 3G only operates over Wi-Fi and has no phone signal... essentially making it an iPod Touch.
Do it... so I put the iPhone in Airplane Mode and enabled Wi-Fi.
BEHOLD, the iPhone 3G full of awesomeness in YouTube videos.
I even did a test right now to make sure I'm not crazy. I just tried "The Angry Video Game Nerd"'s Spiderman game review with Wi-Fi and 3G... blah, after a minute and a half of loading it was going no where... really fast.
Airplane Mode and enable Wi-Fi... "BOOM" says Frank Caliendo's impression of John Madden.
Of course, it's not really practical if you're calling or texting people all the time and you want to receive calls or texts while watching YouTube videos. If you're bored in a meeting or some stupid social get together and YouTube is your only salvation - you got it.
Hope this helps.