After the youtube video has been downloaded...

1) Use FLVtoAVI to convert with the following settings:

-Output file format: MPEG4 - ffmpeg
-Leave the rest to auto and defaults

2) Then XviD4PSP 5.0 with Ipod Touch settings to convert to MP4

3) ITunes, add MP4 file to library.

4) Since ITunes with IPOD Touch