If anyone is still facing this problem, below is by far the best solution I have seen. Works like a charm.
self.webView = [[UIWebView alloc] initWithFrame:CGRectMake(10, 10,300, 200)];
[self.webView setAllowsInlineMediaPlayback:YES];
[self.webView setMediaPlaybackRequiresUserAction:NO];
[self.view addSubview:self.webView];
NSString* embedHTML = [NSString stringWithFormat:@"\
<html>\
<body style="margin:0px;padding:0px;">\
<script type="text/javascript" src="http://www.youtube.com/iframe_api"></script>\
<script type="text/javascript">\
function onYouTubeIframeAPIReady()\
{\
ytplayer=new YT.Player('playerId',{events:{onReady:onPlayerReady}})\
}\
function onPlayerReady(a)\
{ \
a.target.playVideo(); \
}\
</script>\
<iframe id='playerId' type="text/html" width="%d" height="%d" src="http://www.youtube.com/embed/%@?enablejsapi=1&rel=0&playsinline=1&autoplay=1" frameborder="0">\
</body>\
</html>", 300, 200, @"JW5meKfy3fY"];
[self.webView loadHTMLString:embedHTML baseURL:[[NSBundle mainBundle] resourceURL]];
Source: https://code.google.com/p/gdata-issues/issues/detail?id=5204