Annnnd...now we know why Chrome 35 doesn't even allow you to install 3rd party extensions in Developer Mode anymore, and they all need to be installed from the web store.
They might leave the blocker if it comes from the well known ones like Adblock or Adblock Plus, but they will reject any other extension that is purposefully built to block such ads in the new service.
No, the reason you can't install extensions from third-party sources is to stave off crapware and worse from being installed by other programs, which is a real problem.
And it is only applicable on Windows, and not applicable to developer or enterprise channels.
YouTube ad blockers and YouTube video downloaders are one of the few kinds of extensions that aren't allowed on the official Chrome extension store and so are completely eliminated by the new block on sideloading extensions. Google's fine with extensions blocking any other kind of ad and downloading any other kind of content and doesn't generally stop existing extensions from bundling crapware unless they make the news, so those restrictions really stand out.
They might leave the blocker if it comes from the well known ones like Adblock or Adblock Plus, but they will reject any other extension that is purposefully built to block such ads in the new service.