It seems like youtube keeps changing around the way their videos are stored, but the following process worked for me today (December 29, 2006) running OS X Tiger on my Dual 500mhz G4 Tower:

1. Use a site like http://keepvid.com/ to download videos. The file will land on your desktop as Get_Video. Rename it “yourname.flv” It will ask you if you really want to add that flv extension say “add” .

2. Next drop this file into iSquint, available for free at http://www.isquint.org/
Under settings I chose the defaults, Optimize for iPod, for Quality, Standard (or try High). The resulting file will be an MP4 file. This can be dropped into imovie (Imovie will decompress the file right when you drop it in, so allow 3 or 4 minutes before the mp4 file appears into your clips folder.)

2b. Or if you’re like me and you hate imovie, drop the mp4 file right into Final Cut Pro. It will immediately be playable in your viewer window, but when you drop the clip down to the timeline you’ll see that the frame size is all wrong and that the file needs to be rendered. The frame size can be adjusted easily, just click on the first frame of the clip you just dropped onto the timeline and then grab onto the corner of the frame in the timeline viewer window and stretch it out like (holding shift doesn’t seem to work to keep it proportional so do your best). Now click on other parts of your clip, hopefully the image got resized throughout the clip, now all you need to do is render the clip. Depending on your processor speeds and the length of your clip this could take anywhere from a few minutes to a few hours. But the nice thing is, unlike audio transitions and subtitles, once you render your imported video clip it stays rendered even when you move it around on the timeline (and truly edit).