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answers:

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I may be completely insane on this one, but it seems like the download/buffer rate of YouTube videos is faster at the beginning and the further the buffer point gets from the currently playing mark, the slower buffering goes.

Am I crazy, or does it work this way for everyone else?

Assuming the latter, any theories on how they do it? Is it server-side or client-side? I would think it would have to be client-side, but who knows? Not me, that's why I'm asking!

A: 

This is done on the server side, there is no way to do it on the client side.

There are many different ways to serve videos, so it will depend on what server technology you are using if you want to set it up yourself, or you could just use something like RTMP (via Flash media server or Red 5, etc.).

Geoff