Sure, you can embed a YouTube video on any site, but the content ultimately must come from their server. What technology(ies) do they have that prevents us from saving/redistributing content?
From a protocol standpoint, you would think that anything that comes over the wire could be saved. I hope I am not the only guy on Earth who does not know how to "save" a YouTube video...
Mostly it's a legal deterrent rather than technical. There are a plethora of programs out there that will allow you to download their video. But there are two things they do that help reduce unauthorized downloads:
There are a couple of plugins for Firefox out there that let you save the content. Basically it parses the sourcecode and looks for the videofile (either .flv or .mp4) and downloads that directly. The flash player on the page just plays the supplied file. They could of course obfuscate the path to the video file, but that can be reverse engineered as well. They can't really do anything about it, because the video file has to be on the user's computer at some point, or if not, the stream could be intercepted as well.
eg. https://addons.mozilla.org/de/firefox/addon/6584/?src=api
They don't do anything about it. Very likely your Flash viewer downloads a copy and puts in somewhere on your harddrive (under my Linux system with Firefox and Adobe Flash in /tmp). After you are done viewing the file is removed to save disk space, but since it is on your harddrive nothing prevents you from making a copy elsewhere.
You might want to look at the 'analogue hole', in the end, data still has to be displayed on your screen, or get through your speakers and what not. It's always theoretically possible to intercept it at that point, or even just record your audio-out into another machine.
So as far as the analogue hole goes, the only solution is to skip that, in this form:
Which is not that marketable.