Honestly, I do think I get it
If you're getting 100K a day or 1 a day what use is that to us WM's unless we have a way of making sales from it.
You say that the sponsor flash videos are not great but, would we rather use a sponsor video that converts badly or a video that doesn't convert at all and gives pops? There are more and more sponsor hosted flash vids coming out and that's going to continue and increase.
If you're looking for surfers to use your embeds on forums and then spread virally via other non webmaster avenues then that may do alright. But if you're looking at getting WM's to use them on their own sites to add content I dont think it's gonna work.. maybe a year ago it would.
Most wm's who use tube sites to promote will splice together 3 or 4 20 sec clips to make a minute or so, add a beginning and end splash page (a watermark if the sponsor allows it) and then they'll get some type ins from the splash page and for those tube sites that facilitate it a direct link either to the sponsor or their site.
It's well known that tube sites are huge bandwidth suckers, and many cant cover costs.. but if they are going to do so they need to get webmasters on board... imho