Here's what I can figure out.

What could be called a "negative climate" (YRUU 5 year review p 27) had been growing for a while. Many congregations had independently withdrawn support for youth programming, and "LRY" rang alarm bells in the heads of many UU adults. "Locals had usual problems with limited adult involvement; districts were moribund; what was functioning was doing so "in a vacuum"; adults were detached from or even hostile toward the organization as a whole" (YRUU 5 Year Report, 27).
Drugs, sex, and alcohol were a problem in some places. Some of those places got the attention of parents and other adults who were becoming concerned. Some groups made people who did not wish to use drugs feel unwelcome. Those people either left church or became the beginnings of alternative groups, unaffiliated with LRY and continental programming.
Youth were having trouble getting the cooperation and support of adults regarding their programming. Thus, Autonomous Youth became Separate Youth. Continentally, this meant that the LRY Executive Committee had more trouble than expected supporting local and federation activities. Locally this often meant that the groups had been "kicked out" of the churches. This was troubling for the youth, and sometimes had a lasting effect on the youths' involvement with the denomination.
This lack of support meant that often programming centered around conferences, especially federation conferences. As most YRUU youth and advisors know, conferences are harder to supervise than youth group meetings, and they often have a sense of "special space". Adults, especially concerned parents and congregational leaders, didn't always understand conferences, and were scared, intimidated, and/or confused by them. Sometimes the concern (especially about sex and drugs) was justified, and sometimes it wasn't.
Adults didn't have enough connection with the youth to trust the youth and their raising of the youth. Consequently, mistrust grew, and communication fell off. Lack of trust and communication was cited by individual adults, individual youth, the SCOYP report, the LRY position paper, and assorted other people.
It is my personal theory that bad communication is the root of all evil. Certainly, when adults and youth stop communicating it can lead to a lot of bad feelings. In addition to bad communication, the system of youth autonomy led to a few problems with parents. The fact is, worried parents trust another adult of similar age more readily than they trust a youth the same age as the person being worried about. Other adults are also often quicker to anticipate what a parent needs to hear to be reassured. Jim Sechrest recounted an incident that he saw twice, once in LRY and once in YRUU:

Flash to 1975, an LRY con. A parent calls on the phone at 2 in the morning to ask where his kid is. After a search, a youth says, "Oh, he and some others went out for coffee and donuts." and hangs up. No big deal. The youth returns in a half hour and calls home. Parent goes ballistic. No conferences are allowed at that church for 3 years.
Flash to 1991, a YRUU con. A parent calls to ask where his kid is at 1 in the morning. After a search, a youth tells the district level advisor that he (you won't believe this) went out with some other kids and an advisor for coffee and donuts even though noone was supposed to go out after midnight. The district level advisor gets on the phone and says "We are having a little difficulty locating your child since there are over 200 youth here, we will have him call you as soon as we find him." The youth returns in a half hour and calls home. All is well. The coffee and donut advisor was given a stern talking to. She was 25.
The inclusion of adults in YRUU puts the burden of responsibility on the adults. So, when there is a snafu, the advisors... COVER for the youth. They provide a buffer between the kids and the adults of the church so that the YRUU image does not become as tarnished as it otherwise might.

The irony is, from the printed record, it seems that the overall goals of the UUA and LRY were the same. Both recognized the presence of a problem and both wanted to discover and fix it. Both wanted to improve programming. Both wanted more adult involvement and support. Both wanted stronger local programming. Both wanted secretarial support for the continental youth office.
The two groups, as represented by their formal and informal continental leaderships differed regarding the way these things would happen.

LRY wanted continuing youth involvement on the continental level in the form of the Executive Committee. The UUA did not.
The UUA wanted an adult "in charge" of continental programming. LRY did not.
The UUA thought a name change would help get communication between locals and the continental system back on track. LRY seems to have been divided over whether it would help, but seems to have felt that the "negative image" problem could and should be overcome.
LRY felt that the UUA was unfairly blaming them for the sins of their foreparents. That is, that LRY was being "punished" for the abuses of five or ten years earlier. The UUA saw it as one organization. LRY saw itself as an entity with six or eight year turnover.

One way or the other, most people saw a need for some kind of change, be it increased funding, increased support, a name change, or a structural change. The aforementioned mistrust and distrust was exacerbated by the way the decisions and the changes were made.

Changes

SCOYP wrote,
"the committee notes the lack of youth input at the local level..." (6) Adult-youth communication on the continental level had broken down, and SCOYP sent out lots of questionnaires: to federations, district boards, UU ministers and DRE's, the 76-77 Continental Executives, UU Camp and Conference center directors, and LRYers at Con-Con '77. SCOYP appears to have had no information from local groups, on the grounds that they had no list of local youth group contacts,. This demonstrates the degree of breakdown suffered by the continental-local communication, but the fact remains that the recommendations for changing LRY were made without local youth input.
By 1977, trust and communication on the continental level was severely damaged. This caused some communication problems. Jim Sechrest recalls, "Basically, the adults at SCOYP and the LRYers at SCOYP did a lot of yelling at each other. (Big Mistake)". From the SCOYP report and the struggles which followed, it seems clear that the adults felt a need to regain control and the youth felt unfairly attacked and decidedly un-listened-to. Ed Inman writes, "If you really research the minutes of the LRY board meetings during the late 70s, or research the many program packets we produced during this time, the record will show that LRY really did bend over backwards to try and meet every single legitimate concern adults raised about the group's structure and that we really tried to serve all UU youth and regain the support of all UUs—even those who turned their backs on us with rhetorical platitudes." Wayne Arnason was interviewed for the YRUU Five-Year Review, and the interview was summarized by Gene Navias. From the summary: "The SCOYP Report was a thoughtful and balanced document. The UUA board and President Carnes could not fully address it and picked the most negative criticisms and acted on them." Naturally, LRY had pages and pages of comments on the SCOYP report. They disagreed with Arnason's assessment. In the People Soup from April, 1978, someone, presumably the Executive Committee, wrote an article about the SCOYP report and the LRY reaction. One thing they wrote was, "...blanket prejudicial statements are directed at LRY in the report. With the exception of two or three sentences, all that was said concerning LRY was negative. The report does not give a fair and honest representation of LRY's current situation" (People Soup, April 1978, 8).
Beginning an overhaul of LRY with what LRY leaders and members felt was an unfair and dishonest representation of LRY was not a good thing. Then the continental Youth-Adult Committee was consulted. The UUA chose to act on a minority report. In 1979 the continental YAC recommended that a one-half time staff person work with the LRY Executive Committee to coordinate continental programming. That majority included all youth members. The UUA Board of Trustees voted to adopt the minority report, calling for a full time adult staffer and no youth staff.
This infuriated the youth. At General Assembly they introduced a Business Resolution to retain support for LRY and the youth staff. One of their posters read,
"Our Youth's Potential is a Terrible Thing to Waste. Vote to fund youth and adults working together at the UUA continental level." another read,
"HAVE WE MADE A MOCKERY OF DEMOCRACY? The majority of the continental youth adult committee (including all youth members), is in favor of an LRY Executive Committee working in cooperation with a half-time adult staff person to direct UU youth programs. The majority of the UUA Board of Trustees has decided to fund only a full-time adult staff person. This followed a recommendation of a minority of adults on the continental Youth Adult Committee."
The changes that resulted in retention of youth staff on a temporary basis were the result of a "floor fight" at that General Assembly and a compromise brokered by Wayne Arnason. Permanent retention of youth staff was not ensured until the end of Common Ground II, at which the current structure for YRUU was developed.

power

It is difficult to deny that there was a kind of power struggle occurring in the denomination. The "grown-ups" felt, for a variety of reasons, that their control over their youth was not theirs, and that it should be theirs. The youth felt that they had won and proven their ability as leaders, and that they should continue to lead themselves, but with some help. The youth seem to have felt that their request for help had been usurped and was being used against them.

communication

Jim Sechrest noted another one of the key problems, saying:
"They [the LRY youth] carried the responsibility of the events easily and thoughtfully.
I remember crises (pl.) that were mishandled and parents who were upset. Early on, there was a real sense of mystery and excitement surrounding a conference. Unfortunately, the concerns of parents about where their kids were and what they were or were not doing were generally ignored, however. (Big Mistake)."
The breakdown of communication between the parents, the UUA administration, and the youth, seems to have caused some real problems. In the mid-seventies, some of the youth became so focused on "youth autonomy" that they forgot that they were youth. Some of them ignored the concerns of parents and congregations. The youth forgot that their sponsoring organizations were composed of adults, and that ignoring the concerns of those adults could mean the loss of those adults' support, including funding and meeting space. Not all youth forgot this, and not all congregations pulled their support, and sometimes groups which were not on the rocks lost support without warning because the congregation was operating from rumors and not facts, or facts about a group which had already graduated.
Congregations forgot some things too, like the fact that LRY, like all primarily high-school groups, has very high turnover. If it took a year or two to take action, then they might be punishing an entirely new generation—possibly one which had no idea what the congregation was objecting to. Some congregations circumvented this by creating non-LRY high school groups, insulated from the federation and continental activities, but continuing to provide local programming. Most of these groups were organized and run by adults.