I have created what I belive to be the best YouTube expierence for Mac OS 9 for the foreseeable future. Basically, dual boot Mac OS X 10.3.9-10.5.8 with Mac OS 9. Boot Mac OS X, find a YouTube link in Safari, and copy it. Run the newest version of my updated PPC Media Center app available at
https://macintoshgarden.org/apps/ppc-media-center-7x-youtube-streamer-downloader-convertor and download the video using one of the following options:
Download 240p Video For QuickTime 6
Download 360p Video For QuickTime 6
Download 480p Video For QuickTime 6
What will happen is the video will be downloaded, then transcoded to MPEG 4 Part 2. This codec was introduced in QuickTime 6 and I have had amazing results with 480p on my Mac Mini G4 1.42ghz in Mac OS 9.2.2.
After the video downloads, you can boot into Mac OS 9 and play it in QuickTime 6. I recommend buying the license for full screen.
There are many other features of PPC Media Center as well, another one useful for Mac OS 9 is the Download MP3 option.
Of course you could use a Mac OS X only machine to make the file and then copy it over to the Mac OS 9 machine as well. The goal here is to only use a PPC machine for the entire process.