I found something really promising http://www.abdulqabiz.com/blog/archives/flash_and_actionscript/constructing_youtube_1.php I am going to be taking a stab at this myself with the information I found. Hopefully I can get something remotely worthy. Will post later with info on my trial
As I already said, be careful because youtube frequently changes its API and if you find a plugin able to play youtube videos in your own player today, it will maybe not work in a few days/weeks/months...
I'm using this with Wordpress 2.3.3 : http://www.jovelstefan.de/embedded-video/ (it integrates with the post editor)
blagging videos off youtube is definitely frowned upon i would say, i think once you upload a video to youtube you agree that youtube has a certain amount of rights towards that video - plus if you're taking the video without the consent of the 'uploader' it will almost certainly lead you into grief... youtube wouldnt be happy about people pulling videos (and therefore traffic) from their site without question i wouldn't have thought
They why youtube makes the video available to other sites thru embed function?? Don't you think they would take that function out if they wouldn't want you to use their videos in your page?? That's how Youtube BECAME famous: thru that embed function...
Displaying a youtube video in your own player is an issue indeed although the embed function is provided by youtube
VideoDork: http://wordpress.org/extend/plugins/videodork/ This plugin can help with WP 2.5 and youtube embed videos