After struggling with a dozen different tools, Gizmodo throws its hands in the air and says just use Photoshop.

They take you through the five steps.

One thing I learned is that KeepVid is useful for downloading YouTube videos: http://KeepVid.com/

Also, when Saving for Web, make Colors high (256), set Dither high, set Lossy to the sweet spot that keeps your GIF a few Meg. (Image Size can also help reduce file size.)

Fun!

Bonus points if you can make a perfectly looping GIF.