I read a thread from November 2020 about this problem. This is still an issue more than two years later.
Surface Duo 2, Android 12. All apps up to date.
This issue is so frustrating because one can't really watch a YouTube video on Surface Duo 2. I've had to save any video I attempt to watch on the Duo 2 in order to watch it on my Pixel 7 or on a PC another time. And I'm a YouTube Premium user.
If I were to open YouTube fresh, then a video may play without the obnoxious controls obscuring the content. But don't even think of putting the video in landscape mode/ rotating the screen. And don't expect to see the content without the media controls if you launch YouTube from a link in Edge.
Clearing cache has no impact.
Going to settings in YouTube and toggling Listening Controls get you two times the controls as they persist over the content and are now displayed large-scale at the bottom of the screen as well.