Update: Embedding video in a wave is easier than I thought. Just paste the video URL, and it will show a small icon at the end of the URL, asking if you want to embed the video. Click that, and you are done.
And check out the Google Wave Extension for Google Chrome too !!
Google wave is not just for communication and collaboration. It’s for fun and entertainment too. Can you imagine entertainment on the web without Youtube videos ? … here is sweet plugin that lets you embed youtube videos in to a WAVE.
HTML Gadget, the Plugin