I have an ipod touch gen 2 with iOS 4.2.1. It connected to Youtube normally until last 3 days, when I connected to Youtube, the warning "Can not connect Youtube" always appears. Do you know how to fix it?
I think upgrading to later versions of the iOS might resolve the issue. Try iOS 6 or iOS 7 - not sure if iPod Touch Gen 2 is compatible with those iOS's - but it's still worth a try.
Download YouTube app using iTunes first, then on your iPod go to the App Store and download YouTube.it will offer to download the older version, accept that and you are good to go.