Is there a way to improve YouTube performance on the iPad?
With business class cable (10 to 30 Mb/s), even HD videos are basically instant on and play through completely. It's more a matter of selecting a smaller stream size by picking your web site or setting a preference if you can't getting a wider pipe to the internet.

Latency isn't a big issue with streaming video - lots and lots of bandwidth is the major factor you can influence. Your mention of DNS is very important for things like Apple, Netflix, Google (YouTube) and others that set up content delivery networks to send you the files from a data center closest to your internet provider.

Streaming takes little RAM and the CPU is barely involved in video as the GPU handles the vast majority of that specialized task.

The iPad is capable of huge bandwidth on 802.11n networks so it's not something you have to fix or tweak on the iPad end of things...