Hi
let's eliminate a few variables here...
I've just tested with a 3.10.5 install using the Interactivity > Interactive Video page and the direct url and the url stripped out of the embed code both work fine, but pasting the whole embed code doesn't. So try the following:
Test 1: add this url to the File field of your page
www.youtube.com/watch?v=hKUF2E6dyRM does that work? If that doesn't work then what errors do you get in the browser console F12?
If that does work check that the url you are using follows the same format and that the video is public on YouTube.
Test 2: Add
www.youtube.com/embed/hKUF2E6dyRM to the file field of your page does that work? That is the embed url stripped from the full embed code and should work. Again if that doesn't work what errors do you get in the browser console?
As John says 3.11 supports a wider range of permutations (largely thanks to John's hard work!) but the url formats listed above do work even in 3.10.5 so there may be a server rather than Xerte issue that you need to refer to your IT team?
BTW you mentioned 2MB in your original post which I'm guessing means that your install is currently limited to 2MB uploads which is historically a default PHP limit. You are likely to hit other issues with that limit being so low (like importing exported projects) so might want to ask for that to be increased to around say 100MB. That said it shouldn't be increased to 333MB because even if you could upload a video of that size it wouldn't be a reliable experience for your learners because there would be no streaming involved. So using YouTube or Vimeo is the right way to go and should work just fine even in 3.10.5. Let us know how those tests go?
HTH
Ron