Last night I installed the Apple TV update, which went fairly quickly, and explored the YouTube integration. My first impression is very positive. Watching YouTube videos on my big screen is pretty fun.
But, there's always a "but," the enjoyment didn't last for very long. The search functionality wasn't as polished as I expect from Apple. Search results are updated in realtime on the right hand side of the screen as you type in a search query on the left side. Well, I found that the cursor would get stuck and become unresponsive as I typed. Not very helpful.
Also, the selection of videos is limited right now. I assume that they'll be adding in more of the catalogue over time. In any case, the YouTube integration seems like a beta feature that has the potential to become a great addition.
