The object code is copied from the embed text input on youtube:
http://youtube.com/watch?v=VZKQp0nDeBM&feature=dir

1. 1.       Open a page with the editor on it.
2. 2.       Click HTML
3. 3.       Select all
4. 4.       Paste the following (note: the object code has been changed to match your reply):
   <object height="425" width="355" classid="clsid:D27CDB6E-AE6D-11cf-96B8-444553540000" xcodebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab"><param name="movie" value="http://www.youtube.com/v/VZKQp0nDeBM&rel=1"></param><param name="wmode" value="transparent"></param><embed src="http://www.youtube.com/v/VZKQp0nDeBM&rel=1" type="application/x-shockwave-flash" wmode="transparent" width="425" height="355"></embed></object>
5. 5.       Click Normal
6. 6.       Scroll so that I can see the top, you will see an Internet Explorer “Image not found” cross
7. 7.       Click HTML and see the following code:
   <embed src="http://www.youtube.com/v/VZKQp0nDeBM&amp;rel=1" width="425" height="355" type="application/x-shockwave-flash" wmode="transparent"></embed>
   

This can be repeated using Internet Explorer 7 at:
http://cutesoft.net/asp/enableall.asp?AutoConfigure=Minimal

We also tried it using the demos in the download section.