I got the YouTube software upgrade on my Apple TV today. As impressed as I was with Apple TV, the YouTube upgrade is a very welcome addition.
From the YouTube menu, you can watch featured videos, highest rated videos, most viewed and most recent. You can also log into you account and see your favorite videos.
The user interface and graphics of the YouTube implementation are as gorgeous as for the other features of Apple TV. The quality of the video varies dramatically based on the quality of the source content. It’s not HD, but some videos were as good as standard TV quality. After watching a video, you get a list of related videos.
The YouTube content available on Apple TV right now is thin. Of the 22 videos I have in my favorites, only 2 were available on Apple TV. The featured video list, however, largely reflects the videos featured on the YouTube homepage.
A search option is also available, though trying to type out keywords using the onscreen keyboard is more trouble than its worth. The search filters as you type providing a list of available videos, saving you some remote control torture if the video you’re looking for appears before you finish typing.
Upgrading the software was relatively painless, but I had to prompt my machine to check for the upgrade. It took about seven minutes total.
I encountered a few glitches: Some of the videos played back without audio. The on-screen keyboard wasn’t always responsive. The search implementation is a little odd; the number of results can go or up or down with each letter entered.
What’s missing? I’d like a way to create playlists for Apple TV from the Web. Right now there is no indication on YouTube.com of which videos are playable on Apple TV (or on mobile for that matter).
If Apple can bring flickr to Apple TV with a similar execution, I’ll be thrilled.
Update: Here’s a link to the Apple press release (thanks Paul). Apple also announced that they will be releasing a custom YouTube client for iPhone.
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Rakesh Agrawal's blog 
Which show? I hear you.