I've marketed some of my clients legally on YouTube, but it involves actually creating content. If you create novel, original content, watermark it relatively effectively, use social media networks to distribute it, create a branded YouTube account, you can absolutely see real return from marketing on YouTube.
I created a branded account and put up a series of extremely simple tutorial videos for one of my clients. None of it was heavily branded, just subtle watermarking and extremely relevant to the products that the site sells. I submitted them to StumbleUpon and a few other services and forgot about it. Two months after the original submissions, the logs and Analytics started to show reasonable traffic from YouTube. Low and behold, a few of the videos had received six-digit view counts and were getting placed HIGH in SERPs for related keywords.
The most important pattern that we noticed was that the conversion ratios for our sites that appeared on the same SE pages as the videos were much higher. Just having the branded video title a few positions below the actual page created a little bubble of customer and consumer confidence.
So to answer your original question, I've marketed very effectively with YouTube without breaking any TOS or copyright laws.
Regards,
oldenstylehats