Sup.
I find interesting that all the things u propose or have made, were already done.
https://www.smplayer.info/
SMPlayer can do all the stuff (well, with the mix of alternatives sources of youtube-dl and yt-dlp mentioned here, since WinXP drop support and the creator of SMPlayer hasn't update the sources). It's a mix of mplayer, ffmpeg, and other open source stuff. It's not like VLC, but close, and with a plugin already made for youtube, SMtube
https://www.smtube.org/
FIrst u need to install SMplayer. Second, the SMTube plugin. SMPlayer tries to download yt-dlp or youtube-dl but yt-dlp does not work since the exe is from the official sources. youtube-dl is an outdated version and doesnt work either.
We need to download updated versions of yt-dlp and/or youtube-dl mentioned by @VistaLover in this same thread (both if u want). Then, we need to copy one or both exes to...
C:\Documents and Settings\usernamegoeshere\.smplayer
...after a first run of the program.
After that, in config, u need to define resolution and what downloader you'll use. DONT UPDATE WITH THE PROGRAM (you already did that :p)
SMTube works like a browser, that links to a couple of sources for YT search (tonvid.com and other one...really sus.). You just search the video, click, and then SMPlayer opens right away. After a while the video starts (needs to download a bit of the file, i guess).
If VLC is executed instead of SMPlayer, u need to change player priority in the config of SMTube.
That's it! If u need screenshots of everything let me know. Tested and working in WinXP (with a 1.6 Ghz Atom, 2 GB of ram, and a normal HDD). i'm not affiliated with the creator, just an average user.
Cheers!