VLC (Videolan Codec) is a good choice for playing web streaming content. VLC is available for almost every platform including Windows, Linux and MacOsX. VLC version 0.9.8a works well, later versions may have issues.
After installing VLC you have to restart PMS and enable the VLC engine. In PMS go to menu "transcoding settings". Select "videolan video streaming" in the menu on the left side and press the plug-button to enable the engine. After that do the same with "videolan audio streaming". You can use the blue arrow-buttons to change the priority of engines. If you prefer VLC as default streaming engine, move VLC to the top position. Press the save button and restart PMS.
Use preferred filter tweaker for Windows 7 to change from preferred Microsoft DTV/DVD Decoder to another
Using VLC for streaming web videos like YouTube does not work well. It is better to use pmsencoder, a PMS plugin which works as a wrapper for the external applications MEncoder and ffmpeg. Read the PMSEncoder README for instructions.