Just to make it foolproof:
To insert YouTube videos in your WordPress blog do the following:
1. Login to WordPress admin
2. Go to Options >> Writing
3. Uncheck borht Users should use the visual rich editor by default & WordPress should correct invalidly nested XHTML automatically
4. Go to Write >> Write Post
5. Paste the ’embeddable player’ code for your YouTube video in the write box
6. Publish video
That’s all there is to it!
In my opinion this should also work in the HTML pop-up window in the rich-text editor…but for some reason it doesn’t. Perhaps someone with a little more PHP coding experience can answer or correct this…