Can I use YouTube as a source for a video ad or do I need to upload video file & can I place a video ad in a wordpress site sidebar?
YouTube doesn't allow streaming of videos from their site into other players or into ads. You'll need to upload your ad creative as an mp4 video file to AdPlugg.
Yes, you can place a video ad in a wordpress site sidebar. You can see a demo of this here. There are instructions for how to set it up here. Follow the instructions but just use the video ad format instead of the image ad format (note that you will need to be on AdPlugg Pro or better to serve video ads).