But how would you make enough money to support a popular service? Will youtube allow you to place ads next to the videos on your site? The users would still receive the pre/mid/post roll ads.

I'm thinking of first targeting a very specific niche of content and making a recommendation client out of that. If the recommendations are really top notch than maybe people interested in that niche would be wiling to pay to get them (This is what another commenter suggested).

That's the core problem with such ideas: Blekko, metacafe et al have tried it. It's getting people to pay for this service that seemed an impossible hurdle to cross.