I think YouTube is working on converting all of the videos to be viewed from the iPhone. For now though, only certain vids will be found in search from the YouTube app, and there is no Flash support on the iPhone so we aren't able to view them via YouTube.com
By granting users the ability the run flash and java apps on their iPhone, they would effectively be giving you what you paid for, which is unacceptable to Apple. Giving users too much leeway in the applications they can run will circumvent Apple's deal with AT&T. You'd be able to do all kinds of things, like look at any youtube vids with no modification necessary, or use a web based voip softphone to make calls over wifi or possibly EDGE. Send instant messages on any network you like, and avoid paying SMS tolls.
The possibilities are endless. Instead they've decided to screw us and make us think we're actually getting a good deal. Instead of getting a fully featured browser for $600, you get a severely and permanently crippled browser that forces you to keep shelling our dollars to Apple and AT&T for as long as they like. It also eliminates competition, and Apple can o.k. whatever apps they like
and charge whatever they like for them, with no incentive to make things better.
Competition among developers and service providers is what drives prices down and forces competitors to strive to create better products for their customers. And what if you're a developer yourself? Then you have to PAY someone else to develop useful applications for your device.
Obviously I feel pretty strongly about this. I know there are many ways in which this policy could benefit iPhone users, and I truly hope that is true. I must admit that in spite of all these shortcomings, my iPhone's dead pixels and AT&T/Apples unwillingness to replace it, and the fact that I cannot access any messenger services or web-based apps, the iPhone is still the best mobile phone on the market right now even with it's limited functionality.