I'm also running into a few issues with downloading and playing videos that worked fine in previous versions. It does seem to have something to do with the download quality chosen. As you note, the problem goes away if you select "normal" quality. I would also note that this issue even occurs on some videos where there is actually an option for a higher resolution available on the YouTube site (e.g., some videos may only work in CuteTube at the 360p download setting, even though 480p versions or higher might be available).