The plugin uses "simple pie" http://simplepie.org/ to parse the feed. Simple Pie strips out iframes, thus embedded videos. This can be fixed easily, but it requires editing a plugin file.
The solution per http://affiliatecontentmagic.uservoice.com/knowledgebase/articles/162609-using-wp-o-matic-plugin
Edit Required for SimplePie Library to Play Videos
N.B. - You won't be able to edit this via the Plugin --> Editor inside of WordPress, you have to log in via FTP to your site.
In your favorite FTP client / code editor, go to the folder:
Inside of that folder, open the file named "simplepie.class.php".
Search for each appearance of the phrase "iframe" (there should be 3) and DELETE them from the file. (Make sure you don't leave extra commas in there!)
This code is filtering OUT various types of code from appearing in an RSS feed. By removing "iframe" from it, you're ALLOWING iframed videos to be shown on your site.