But the tech is really interesting and as a federated alternative I could see it doing really well. Best of luck to the team!
Normal people don't want to hang around in a bar that allows nazis, and nazis from everywhere go there because it's the only place.
Peertube solves the easy problem (infrastructure) and ignores the hard problems: search, discoverability, moderation, accountability, handling all the relevant laws.
Therefore their mental model will equate Youtube (a service) with Peertube (an application used by multiple services). If illegal content is on some Peertube, it's "on Peertube" and it drags down all the other stuff that is "on Peertube". Just like how big advertisers withdraw all their campaigns from all of Youtube when a single popular Youtuber posts a particularly distasteful video. They don't recognize the substructure inside Youtube's community because, to the public majority, Youtube is a monolithic thing. It's going to be the same for Peertube. (Unless Peertube has a better marketing department than behemoths like Youtube, which it likely has not.)
This is a problem with federated services in general. People always seem to want to register on the "official" instance, when really there is none. I think there should be a solution to help people make the decision, or better yet not force them to make a decision at all. Maybe some OpenID-type login/account system should be used instead of having to make an account on a single instance. Or simply stop trying to market the underlying tech, like Mastodon or PeerTube, since that's not going to make a difference to the end-user and will just confuse them.
When you go on Youtube and watch someone's channel, the side bar shows you suggested videos from other channels.
PeerTube can do that same thing even if every channel is hosted on its own instance. The administrator just needs to link their instance with others (so they can, for example, avoid linking to porn instances or other undesired/unrelated topics), and PeerTube will start displaying videos hosted on other instances all without requiring the user to visit another website.
Edit: "a system where videos require manual approval by administrators before posting them" If you're seeing a ton of porn, then clearly the sysadmin's beliefs/views don't align with mine.