But the video is back, and you can see it for yourself here.
UPDATE: As Rich Trott points out, Watts has replied here. He says that the basis of his copyright complaint is that the video shows the cover of and photographs and graphs from his book, but doesn't say why he thinks the video exceeds fair use. He says that the NCDC's response to his data (a) used out-of-date data and (b) used a process guaranteed to have two similar graphs, by taking a weighted average of the good and bad station reports even in the line reported as just the good stations.
This is not exactly correct--there is a correction for urban heating that does use nearby station data, but even if you do not perform the urban heating adjustment step, you STILL get two graphs with essentially the same trend. (This was indirectly linked to in my previous post on this subject, through my link to the Daily Doubt blog of frequent commenter Hume's Ghost.)
UPDATE (August 10, 2009): Climate Progress points out the inanity of Watts' defense of his DMCA abuse, observing that he's suggesting copyright infringement on the basis of a few graphs and images shown from his book, which is given away for free in PDF form on the Internet. So not only was Sinclair well within fair use based on the amount and substantiality of material used, there's no chance that Sinclair's video could possibly have had any adverse effect on the commercial market for Watts' book, since there isn't one.