Last part is already done. Ads are delivered by the same DNS as the video, which is why DNS-based blocking methods like Pihole don't work for YouTube video ads.
If you meant that Google will re-encode every video on their platform and insert ads like the sponsor segments, that's not feasible. Ads ads served on a bidding basis and the advertiser who pays most, gets their ad delivered. That would be Impossible unless you keep multiple copies of the video with different ad segments.