If the youtube video has some sort of copyright violation, and I embed it onto my page, is that okay with the TOS?
I think it is very usual thing, that everyone does. I do that as well. I think there is no relation between adsense and copyright.
I misread the question when I saw it the first time. I do not embed any YouTube videos with copyright violations -- that I know of. That could, theoretically, get you into conflict with the AdSense ToS.