I have an iPhone 3G and I love it. My coverage is great and the service and phone itself is great. The iPhone starts at 70 dollars a month which includes 450 minutes a month and unlimited data(email/internet) the plan also includes 80 free texts a month. You can upgrade your texting plan to 200 texts a month for 5 dollars extra. You can get even more texts a month by upgrading to 1500 texts a month which costs 15 dollars a month or get unlimited texts for 20 dollars a month. AT&T is also upgrading and making its 3G network work in more places. Getting back to your question on youtube, no you do not need to be in a wifi hotspot to watch youtube videos, altough it is recommended. Youtube will work over the EDGE network but it will take a very long time for the video to buffer. It is recommended to be in a 3G or WiFi zone to watch youtube videos without problems.
The iPhone 3G is a good improvement over the iPhone 2G (the first one). First of all the price was slashed in half. The cost of the first iphone 8GB was $400, now the iPhone 3G 8GB costs $200. The iPhone 3G also supports AT&T's 3G network, hence its name. The iPhone 3G is also now available in black for the 8GB and white or black for the 16GB. The iPhone 3G also comes with the AppStore which is a "store" with 3rd party applications which includes games(Spore, Asphalt 4: Elite Racing, Air Hockey, etc.), entertainment apps(iBeer, Fortune), Social Networking(AIM, Facebook, Myspace), and many many more. The headphone jack is no longer recessed, so you will have more headphone choices without a clumsy adapter. The iPhone 3G also comes with a better GPS which will track where you are and show real-time tracking. Now that the iPhone has GPS, geo-tagging has been added for photos, so you'll always know where they where taken. The screen is also a little bit higher contrast than the old iPhone so images will appear crisper, and the screen has been given a slight blue contrast so that it is easier to view when in sunlight. The audio has also been improved, the audio speaker is now much louder and much more crisp with no distortion. The call quality has also been improved with a louder earpiece and much clearer. That's it, I have found the iPhone 3G to be a dream and it is rumored that 3rd party software makers will be making a video camera app so the iPhone will finally have a video camera! I think everyone should purchase an iPhone because its just so magnificent. Hope you enjoyed, Cheers!