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This is basically a type of youtube radio, in which you just have to provide one video of your liking, and the player does the rest. It automatically picks best match related video and plays it automatically.

I dont think its currently possible on youtube, and more over youtube is'nt meant to do this.

Is there any way to preload in the background so that you don't have the awkward pause between song changes? That'd be really great.

The autoplaying of a new song is a feature that doesn't work in youtube, unless you make a playlist. I love that I can type in an artist, click a song, and go about my work.