Why does my YouTube app have performance problems and outright failures?
Maybe it's not the whole answer but two things seem to have made a big difference:

One, my Captivate was recently upgraded to  Froyo officially. The new Youtube app seems to perform remarkably better.

Two, and this is the really interesting bit, I switched from WPA on 802.11g to WPA2 on 802.11n, and my wifi speeds went from ~200-300k to 4-5M. Not sure exactly why but it's definitely something to consider if you see performance problems in an app that relies on the network...