I assume you are running 2.2 and have installed the ADOBE FLASH add-on ??? If you did, there should have been an Adobe app called "Adobe Showcase" installed ... does THAT run OK ??? (This would be just to confirm that FLASH is properly working on your Droid.)
Have you updated to 2.2 that added Flash support, also did you update to the recent YouTube app that recently got released? I never had any issues playing YouTube videos on the droid X... If you are viewing the full view web page it will not play without flash but the mobile version will play through the YouTube portable app without issues. Also files from iTunes are usually in a different format because they add their copyrights to the file, this will restrict what players that can play the files and this sounds like your issue.