Is it possible to embed a youtube video into pages and then export it in to pdf or epub?
Yes and no. Basically it depends on the type of media and the reader being used. I.e., does the reader support media files and, if so, what kind? With reference to PDF, I would probably go with what Peter says as I have never attempted this yet myself. As to ePUB, you can embed multimedia content (audio and/or video) within the ePub package using appropriate software and play it back. Remember, however, that multimedia playback is not part of the ePUB standard. As this was a very interesting question for me, I decided to put together a "quickie" test file and see how well it worked on the iPhone, iPod Touch, and iPad as supported by the iBooks reader. (File will open in other readers I've tried but the media content was ignored.) For those interested, you can download the resulting file at the following URL:
SAMPLE VIDEO EPUB
If not, do you know of other, free software that will do this?
Don't know of anything free that will automatically process/link the media/poster files (which I assume you could create using various Apple apps) but believe it would be possible to manually modify Pages ePUB package output if you are good with HTML/XHTML coding (which I'm not). In this case, I used the ZappTek Legend Maker app which I have been using since before Apple added its own ePUB export. Both Pages and Legend Maker work flows have their own strengths and weaknesses and I am constantly jumping back and forth using them.