I've GOOGLED around on this and there are a variety of converters out there apparently, but I'm wondering what is the consensus current best. (Free or super-cheap would be nice).
Jerry, support for many high profile mp4 features is missing in Vegas Pro 8 because they weren't invented yet.
Also, Creative Commons license does not automatically give you the right to alter, edit, remix, or otherwise repurpose a video that can be publicly viewed or downloaded. That determination is still the domain of the owner, so it would seem a good idea to ask. Wikipedia has a good summary.
To download the original MP4 of a YT video, just prepend ss before youtube in the URL if the video. So, if you want to download the video in (for example), just go to http://ssyoutube.com/watch?v=Iye9YDAI66c and select the highest resolution available. No converter necessary.
"Also, Creative Commons license does not automatically give you the right to alter, edit, remix, or otherwise repurpose a video that can be publicly viewed or downloaded...."
The CC-BY attribution licence available to YouTube uploaders actually does give other users such a right, even for commercial use, with certain restrictions including the need to attribute. The license should certainly be read and understood before going ahead. More here.