Its been going on for about 6 months or so. I feel like when the app first came out everything was fine and then with one of the subsequent releases (I remember there were problems with my subscriptions / playlists as well) I started to have issues. The connection seems fine since the videos always play right away in great quality. After some time (30secs to 2 mins) the video stops, the wheel spins and spins and eventually I back out and try again. I then re-enter the video, fast forward to the point it left off (it plays right away) and the same thing happens every time.
I am able to play every other program on my xbox perfectly fine. I'm able to play youtube on my iphone, droid x, galaxy tab, laptop, and desktop with no problems. Because of this I have ruled out connectivity and hardware issues.
Look closely at the buffering for the xbox. I have a funny feeling that this is where the problem is. Why doesn't the app show a buffer like every other youtube application (mobile, desktop?) Additionally, you absolutely must build in something to downgrade the videostream like you have done on phones and my galaxy tab. This should be done by a menu option that allows: 1. Low Quality Stream (shorter buffer needed) // 2. High Quality Stream (longer buffer needed) // 3. Adaptable Quality Stream (connection speed determines buffer length and video quality).