YouTube embed code in Wordpress MU
By default Wordpress MU does not allow embed code even when using the HTML post feature, which is different from the default Wordpress install.
To disable this: Edit wp-include/kses.php. In that file search for “Post filtering” and then comment out the following line:
//add_filter(’content_save_pre’, ‘wp_filter_post_kses’);
This will affect all blog instances within the Wordpress MU installation.
I found this solution here.