YouTube plays just fine in OS2008. It isn't as smooth as a full blown PC, but it is still very watchable (might just be the videos I've tried; letting them load fully before playing them helps).

Browsing overall works fine, though some people find the font too small by default. If that's you, then you'll be zooming in and panning around a fair bit, but even that works pretty well. I haven't really hit any sites that totally were unmanageable. Google Reader was pretty tight due to the resolution, but there are some custom CSS tricks you can do which crop out Google's useless page elements and make the site much more usable.

No Java support. JavaScript, yes. There is no JRE on the tablet AFAIK.