What holds youtube from blocking all videos to addblock users just as other sites do?

It’s a constant game of cat and mouse, an arms race till the end of time. You can’t block videos from ad-block users if you can’t tell which users are using adblock and which are not.

I don’t understand why self hosted videos aren’t more popular

It’s quite complicated technologically, and requires quite a lot of storage space. Viewers only go where the creators go, and the creators have no reason to go to someplace that is more of a pain in the ass to host videos.