Yep, it's just a front. I weighed the options and to host the videos on the site itself has a lot of disadvantages. For one, the download time can be really long if people don't have highspeed. Also, the bandwidth is very expensive for that much space. Plus, if people wanted to send videos to you, it's difficult because the files are so large. You would have to send it through yousendit.com or something but even that is limited to 100 MB. Youtube is limited to 100MB but you can compress files that are larger than 100MB and optimize them for the web.
One big disadvantage to youtube is what will happen if they decide to cap the server space you can use? Right now, there is no limit to how much you can upload but if they decide to put a limit on it in the future and start charging for it, I'm screwed! But for now, this is the only option I can really afford. I'm keeping my fingers crossed that youtube will stay cool and continue offering the service for free (and maybe grandfather people in who had uploaded videos before they start charging).