A quick shameless plug: If you only want to "subscribe" to YouTube RSS feeds, you can use gPodder which will from then on happily check the feed for new videos and ask you if you want to download new content to your device. The videos downloaded are in the "normal" MP4 format, and they look great and play well on the device.

You have to hit the "Subscribe" button, scroll down to "YouTube user channels", enter the username of the user you want to subscribe to and then you get a list of matching YouTube users. Pick the ones you would like to subscribe to, and let it download videos for you