I've made a fair number of my custom MP3s from YouTube videos in the last year or so.
What I do is download the video with YouTube Downloader, then convert it to WAV, then do some editing on it, normalise it, trim it with fades and then convert them to MP3s with custom bitrates.
The question is, does the legality of it vary with the source video? I've done a few pop songs, some TV broadcasts of classical works, some TV show themes, but most of the stuff is from the Demoscene, which is copyrighted but free.
I'm just wondering what any defence could be if the cops uncover my little collection - maybe YouTube themselves would be open to litigation for hosting the original files?
In any case, they'd probably slap a lawsuit on me for the Demoscene stuff, which they think is copyrighted, but in fact isn't.
Maybe if I leave the files in a single A-Z format like I currently have done, they'll find it too much bother to determine what's innocent and what's dodgy.