For the video to show, a Youtube video ID, rather than a URL, is needed. For instance, if you have this video: 'http://www.youtube.com/watch?v=eBG7P-K-r1Y' The youtube video ID you should use in the video slide would be: 'eBG7P-K-r1Y'.
The slideshow indeed doesn't stop (yet) when playing the video. There is a pause button available in the control panel, though. You can activate it from the settings.
I've put the pause on play feature, as well as the one for accepting Youtube URLs, up on the Slideshow project board. These features should be available from version 2.2.0, which I'm currently working on.