http://blog.darkhax.com/2009/12/30/hacking-markitup-to-help-me-embed-videos

div.html

<div id='REPLACE-ME-video' class='swfembed' movie='URL' mheight='HEIGHT' mwidth='WIDTH'>Witty comment about needing Javascript goes here...</div>

embed.html

<object width="853" height="505">
  <param name="movie" value="http://www.youtube.com/v/nl-qaTmazB0&hl=en_US&fs=1&hd=1"></param>
  <param name="allowFullScreen" value="true"></param>
  <param name="allowscriptaccess" value="always"></param>
  <embed src="http://www.youtube.com/v/nl-qaTmazB0&hl=en_US&fs=1&hd=1" type="application/x-shockwave-flash" allowscriptaccess="always" allowfullscreen="true" width="853" height="505"></embed>    
</object>

markitup-youtube.js

function(h) {
  var html = "<div id='REPLACE-ME-video' class='swfembed' movie='URL' mheight='HEIGHT' mwidth='WIDTH'>Witty comment about needing Javascript goes here...</div>";
  var sel = h.selection;
  if (null == sel || '' == sel.toString()) {
    return html;
  }

  html = html.replace('WIDTH', /width="(\d+)"/.exec(sel)[1]);
  html = html.replace('HEIGHT', /height="(\d+)"/.exec(sel)[1]);
  html = html.replace('URL', /src="([^\"]+)"/.exec(sel)[1]);
  return html;
}