Scoble says Google bought YouTube because it "realized it couldn’t make its own video service look as cool as YouTube."
As I said before, Google was buying YouTube's audience and/or employees, not the technology. After listening to the Google-YouTube conference call, it definitely sounds like Chad and Steve were a big part of the purchase. Eric Schmidt gave them very high praise, comparing them to Larry and Sergey.
Though I have to wonder if Larry and Sergey were this giddy when Google went public. (Mind you, I can't fault them too much, because I probably wouldn't act too much differently if I just made that kind of money).