What is the best way to watch YouTube HD on a TV?
1) As Chinster said, there's the Youtube app, or most specifically, the Youtube Leanback app. You pretty much do the basics like search for the video you want by typing on the Boxee's remote, or browsing through the app.
2) My preferred method is using Watch it Later. I explain this in depth in my review of the Boxee Box, but I'll repeat that here: you add a bookmarklet to your computer's browser, and when you come across a video you want to watch later on your big TV or to show to guests, you just click on the bookmarklet. Later, you bring up the "Watch it Later" section on your Boxee Box and see your queue of videos. It's incredible how useful this becomes, and it quickly became the most surprisingly useful feature of the Boxee Box for me.
The Box is expensive, but it's fantastic at handling local content, and renting movies through vudu is like a dream. You can get nearly bluray quality in a $6 stream, though the SD quality looks as good as anything I've seen on the Apple TV.
I don't recommend the Boxee Box for non-geeks, though, so if you're looking to get something for someone else, they should be pretty geeky, but it seems like you're asking for just yourself...
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What's nice now, though, is that for random one-off videos I can find them on my phone (which is easier) and send them to my Google TV directly. It's basically Airplay but for Google :)
You might want to check out the Boxee Box. It has a Youtube app and a ton of other online video apps that are decent. boxee.tv
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