Can I create an android app that uses youtube API to download videos, forward them to the user, and display them offline (in-app if needed)?

Question

My current umbrella idea for an app is:

• Provide the user choices for downloading/tracking content (for example: the archives of fanfiction.net, RSS blog entries, or in this case, youtube channels with videos)
• Send download requests to the server, to download, ready, compress, or help in any way to lighten the download when sent to the user at a later date.
• Download the item in the background, notify users when requested item, show on "homescreen" when downloaded pre-emptively.
• Cache the result depending on user interaction with the item, when "done", flag for low priority upon clean sweep.
• (based on optimistic wifi connection intervals, download content when you can, and forward those queued download requests when connecting to the server)

My question is:
Can i include youtube in this app (and apply to this concept)?
Can i make requests from the server, which downloads the video at different resolutions and later distribute it to clients?
Is it allowed for a third party to download those videos and later distribute them, but link back to the original content?

Most of the youtube API and TOS is foggy about exactly this scenario.

Answer 1

Embedding

Embedding is fine, they even provide the YouTubePlayerView to make this easier.

Download rules

A lot of sites and apps ignore this, but section 9.1 of the TOS says this:

9.1 With the exception of Content submitted to the Service by you, all other Content on the Service is either owned by or licensed to YouTube, and is subject to copyright, trade mark rights, and other intellectual property rights of YouTube or YouTube's licensors... Such Content may not be downloaded, copied, reproduced, distributed, transmitted, broadcast, displayed, sold, licensed, or otherwise exploited for any other purpose whatsoever without the prior written consent of YouTube or, where applicable, YouTube's licensors. YouTube and its licensors reserve all rights not expressly granted in and to their Content.

So without permission in writing from YouTube you are not allowed to do this. They have been known to threaten to sue websites for this. Source