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As a video maker,
i have to say this advertising practice is disturbing.... YouTube would take copyrighted contents off the network, because viacom or whatever asks, but when it's user copyrights, they dont care as much! These videos are made by users, for users, and should not see their creative content impeded !! Imagine I decided to place my logo on a disney film !! do you think they would like that ?? Place the ads around the video You Tube, or we will revolt !
As an advertiser, I know this will not work. It might sell well, because YouTube is young and this breaks the mould, but here's a detailed analysis of why it won't work