Yes, it does work on Google TV, but you need to have version 1.6 (4845) of the YouTube app (or higher).
All of the YouTube API sample apps work on GTV: https://developers.google.com/youtube/android/player/sample-applications
You can play HD videos using the YouTube API which looks great on a TV.
I have open-sourced a GTV app that uses the YouTube API: https://github.com/entertailion/Video-Wall
The app shows a video wall of thumbnail images for videos in a YouTube playlist. One of the thumbnails will flip over and begin playing a video from the playlist, which will play until it finishes. After that, the video will be replaced with a thumnbail, and a different thumbnail will flip over to play another video.