It's really bullshit, it's a shame no serious competitor is stepping in. Being a US site owned by google they have to answer to copyright(not nessarily in the stupid way they're doing now) and censorship, while another site could offer the similiar service without all that.
Lack of competition is definitely part of the problem, but there's no easy solution.
If you start up a new video hosting website tomorrow then your options are either to follow copyright law or ignore it (I'd be very surprised if the location of the servers makes any important difference at the end of the day - if people are going to make a living off of it then they can reasonably expect to have to toe the line somewhere). If you ignore copyright law then at some point a big company is going to come knocking on your door and, quite justifiably, sue you for everything you're worth. If you don't ignore it then you're going to need the legal firepower, corporate connections and financial backing to come up with an agreement amicable to hundreds upon hundreds of different companies from all across the globe. It's not exactly a kickstarter-friendly prospect.
And even if you manage that, what are the chances of you ending up with a legal arrangement better than what Youtube already has? And if it is, will it be good enough for TotalBiscuit and the rest of them to stake their livelihoods on this new, relatively untested business platform? Either it would have to be magical in a way that I can't really imagine or Youtube would have to go nuclear. Safe to say that for the time being Youtube have this gig locked up, and that's the way they and the men in suits like it.