Here is a updated Cydia application from the developer Albert Schulz named YouTubeToMp3 which can download YouTube videos and convert them to Mp3 and then add them to playlists.
The developer has updated its application in version 4.0-1
Be careful though this update requires a lot of dependencies.
It aim is to test the function “Add to iPod Library” which is to transfer your music downloaded directly to iPod without a computer .
Unfortunately this feature is still version “alpha” and does not yet work on iPhones and iPods 4 but if you click on Import into Library iPod after selecting your desired music then you get this message:
If you want to continue, click Okay, so you get this:
Fill in the appropriate fields and click Import. Then go into your iPod and search your music previously imported. For me it is not working (iPhone 3G, iOS 4.3.3). It is a free tweak available in the BigBoss repo.