First off, it looks like youtube.com are redirecting to a different  
server.  E.g., when I ask for http://www.youtube.com/watch?v=_P6FbU4baWk&feature=dir
  I'm really redirected to http://uk.youtube.com/watch?v=_P6FbU4baWk&feature=dir

Sloppy doesn't assume that the server you're redirecting to the same  
as the server you asked for, so it's stepping out of the way there.  
The tell-tail sign is that your browser window will show an address of  
"http:/127.0.0.1:7569" when Sloppy it's involved.  It'll show some  
other address when it's not involved.

The fix for that is to track down where you're being sent to, and use  
that address instead. For me it was a uk.youtube.com, but might be  
different for you. That will cause the HTML page to go through Sloppy  
and that should appear slow.

This has been a pain a couple of times, so I think Sloppy should  
change it's behaviour here, and I've captured this in http://code.google.com/p/sloppy/issues/detail?id=9

Second thing is that Sloppy won't attempt to slow down Youtube video  
content.  From what I can tell, the video content is being sent from  
v6.cache.googlevideo.com, which won't be passing through Sloppy so  
won't be slowed down in.

That's a much bigger issue for Sloppy.  I'm not sure what the right  
solution is. In principle it seems possible that anything Sloppy  
receives could be re-written to ensure it goes back through Sloppy...  
but in this case if the Flash player is making the decision of where  
to get data from (and I don't know that for sure), then Sloppy is not  
going to be able to change that.

If anyone has any bright ideas about what to do here, feel free to  
chip in.

I also realize I need to fix http://code.google.com/p/sloppy/issues/detail?id=7
  ... not being able to paste Youtube URLs is a real pain.