This is a good question and I am not sure if a definitive answer has been given from any court system.

I make extensive usage of embedded videos throughout my sites. I have been operating under the conclusion that embedded videos are the same as in-line image links. As such, it is not direct copyright infringement because I am not hosting the video on my sites. This would be the same scenario as in the Perfect 10 vs Google lawsuit where an appeals court ruled that since Google did not have the material object which was displayed that it was not in violation of the Copyright Act.

I hope this helps.

-Moe Green