It looks like the wmode attribute is not set. Trying this on our test network, we don't see any overlap issue in fact the attribute wmode="opaque" is automatically inserted even if you omit or make some changes with your embed code.
You can also verify this by loading a default clean theme (test network) and testing it with the same setup as above to isolate the problem.
I Have it! :-D
Information about wmode was useful for me. Youtube embed code does not appear wmode, but you can just add it to the end of url. As follows: