You should be able to embed the video in a slide if you have downloaded it into a file. Alternatively, you could display a link to the youtube video -- and then click on the link when you want it to play (which will likely play it in your browser).
Not sure if there is a way to have it automatically play a remote video or embed an IE page.
There are plugins for most modern browsers to allow YouTube video downloads. Once it is on your machine you can tell Powerpoint to embed it, but make sure you test if it can actually play that video first. If it cannot, you probably need to convert it to mpeg or wmv format first.
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