Tried both in IE and FF.
Using default hosts file
I got both ads coming before the video and on screen in the video as well.
I let it run and there was the ads that came through and got ads showing up in the video before the video. What's odd is the googleadservice ads will show up in FF but not in IE???
When using my custom hosts edit
I got no ads coming before the video but in FF I got a Windows 10 ads from googleadservice. I redid it by blocking the googleadservice ad and now it's gone but I get a "x" block windows but the ad there is gone from view.
I'd left it run and there was no ads but other then the googleadservice in FF for Windows 10.
For now I will keep using my PC hosts file and keep blocking those ads. I did use IE to test by closing and opening it and then copying the links into as a test with one browser FF running and the other one to close IE and open IE to test if leaving it open would show the same ads or not or if it will work with the hosts file.
Conclusion the hosts edit works in blocking the the most intrusive and regular ads from showing up in Youtube.