as per the original question. Windows Media Player cannot stream videos from youtube because windows don't have a FLV codec. and they won't make on because Microsoft and Adobe and a falling out a few years back, and since Adobe acquired the flash platform and refused to give Microsoft the rights to use it on thier system. Microsoft created silverlight, and thus, Flash Video Integration into windows won't be around legally for quite some time. Sorry.
if you want to just load a flash plugin com object into you C# windows form app and load into that a swf movie that plays FLV, you can then migrate flv videos from youtube to your application.
But that's all the help I can provide as I am really busy right not, and this is a very complicated project.