most of the youtube videos are encoded in high profile cabac format i.e hp h264 in mp4 container...n900's dsp is not enough powerful to decode them (it can only decode baseline profile h264 videos)...

if u wanna try playing 720p hd video on n900, either decode it into baseline profile or for testing u can simply use n900's own camera with settings set at hd...it encodes video in baseline profile..