The article is not entirely accurate
Microsoft didn't just re-release the app, the recent YouTube app that MS released had several features that Google took issue with, two of them being that it bypassed all of the adverts and allowed downloading of content.
Google cried foul, then shortly after this Google and MS announced that they were going to work together on a YouTube app. The new app now shows the adverts and basically complies with everything Google wanted. But less than 24 hours after release, Google blocked it because it wasn't coded in their preferred language... WTF. To me at least, this seems at the least petty, and at worst just blatant obstructionism (is that a word?).
This app has cost Google nothing, Microsoft have done all the work, so I'm not really sure what their issue is, surely people who pay to advertise with Google/YouTube would want their ads on all possible devices. Granted Windows Phone has a small share of the market, but every little counts.
If I were in charge at Microsoft I would seriously consider releasing an update with the next round of patches for desktop Windows that blocks all Google apps.