You're 100% correct. PiHole is a DNS adblocker so, essentially, it's only able to block whole domains. My understanding is Google puts YouTube ads behind the YouTube domain so if the PiHole blocked YouTube ads, it would block the entire YouTube website which defeats the purpose.
It's been awhile since I looked, but when I did a few years ago they had hundreds of subdomains for their videos (both regular and ads) and would rotate what they're used for all the time. That's why its basically impossible for PiHole to anything.
