This is a problem that exists on up-to-date Android Youtube, but NOT on Google TV with Android 3.2.
With SOME videos, like this film I just rented:
"They Call It Myanmar: Lifting The Curtain"
Trying to play it on my Chromecast from my Samsung tablet, or on my EQUISO TV Stick, I get the error:
"This video can only be played on newer versions of Android or other supported devices"
But on my SONY NSZ-GS7 it plays beautifully.
And no problem on the Web version of Youtube on my Windows PC, with Chrome browser.
Other people have had the same problem with other films.
I searched that error on Youtube Help with no results.
This seems to be related to the parameters (resolution, etc.) and the latest versions (since February 2015) of the Android Youtube app.
Have any of you seen this problem on any of your Youtube platforms?