Ok, just installed wordpress 2.9.2.
I have auto-embed enabled in the settings, but when posting a new post/page with a link youtube link, it just stays that way like plaintext.
If I got to "add media", the "From URL" tab looks nothing like this:
Instead it has URL and Title fields. If I insert a youtube video this way, the result is a static link named "?v=youtubecode".
Typing in the following:
Also produces no result, gets posted like plaintext, even if I use the HTML editor instead of the visual one.