PLEASE SEE MY SEPT 30, 2012 POST BELOW FOR A MUCH EASIER FIX !!!!
After allowing an upgrade for the free app to ver 2.2.7 on Sept 14, I could no longer play youtube videos (got error about needing to check connection). When trying to download a video, it said searching... and nothing happened. I worked on this for hours and found the same happening to a lot of users of this app. I finally discovered the app's website that's found in the app by clicking on Setting, then Share With Friends. After going to that webpage (which is for the pro app) I found a link for the free app and clicked on it. Then on the free app webpage, I noticed that there's now an upgrade to ver 2.2.8 for the free app dated Sept 14 to fix the download problem. There is also a link to an installer app called SAMv4.5 on the page. I downloaded the SAM installer app first and installed it on my Kindle Fire (this worked fine, even though my Kindle has not been rooted). I already had my Kindle set to allow installation of applications from unknown sources under More.. Device. I used SAM to first uninstall the 2.2.7 Freedi Youtube Downloader. It probably helps to also delete the app from the cloud before installing the new app. To do this, I got on my Amazon account, scrolled down and selected Manage Your Kindle and on that page scrolled down and on the left selected Manage Your Apps. Then browsed to the Freedi Youtube Downloader app. On the right hand there's a drop-down where I deleted the app. Then I went back to the apps on my Kindle Fire and used the SAM app to download and install the version 2.2.8 free Freedi Youtube Downloader app. It now works perfectly again.