MxTube is a very powerful 3rd party application fro iPhone, it allows you to download video from youtube directly to your iPhone (you don't even need to connect the iPhone to your computer).
However, the downloaded videos are not under the iPod menu and aren't recognized by iTunes, to sync them back with iTunes, do the following:
1. Download and install iPhoneList on your computer
2. Connect your iPhone to your computer, and run iPhoneList
3. Browse to /MxTube directory where the videos are located (files with mp4 extension)
4. Select all files and then right click and select "get files", choose the location where the videos will be copied and extract them, to delete the videos from MxTube directory use MxTube delete feature in your iPhone, don't delete the mp4 files via iPhoneList!
5. Move the videos to the iTunes sync directory. You may want to rename them.
6. Launch iTunes and sync the videos, that's it!