The video, "In memory of Councillor Alan Craig", features the Leader of the Christian Peoples Alliance party, his wife and two daughters.
The two-minute video, which has now be taken down, was added by a man calling himself "abdullah1425" and was set to the strains of Elvis Presley's song Always On My Mind and opened with its title and the words 'To God we will all return'.
It featured a boxing scene with an Asian punching an opponent to the ground before ending with the message: "The mosque will be built in time for the 2012 Olympic Games."
When the video was uploaded to Youtube, there was a web link from the Abbey Mills mega-mosque website to abdullah1425's YouTube mini website, where he identifies himself as Muhammad, 23, from Stevenage, Herts. It also had links to material relating to Tablighi Jamaat.
In one comment to another user posted on the site he said: "Jihad starts from the moment your mother gave birth to you." Police have taken a statement about the video from Cllr Craig. The man behind the posting has now been bailed to return to a police station in Hertfordshire.
Commenting, Cllr Craig said: "This incident now seems over. I will not be intimidated by threats of any kind as important issues about this mosque have to be addressed in an open and fair fashion. This whole episode has exposed the reality that some Muslims accustomed to using either violence, intimidation, or the threat of violence are linked to the idea of this mosque.
"I cannot say it often enough: the proposed mosque will be bad for London, bad for the community and an invitation for the propagation of separatist and fundamentalist Islamic ideas. Up to now, Mayor Ken Livingstone and the Labour establishment have turned a blind eye to the real nature of the organisation behind the mega-mosque. I hope they will look more seriously at them now."
Mr Craig represents Canning Town South ward in Newham borough, where he has the support of many Muslim residents in the area in his opposition to plans for the "mega-mosque" at Abbey Mills, near West Ham tube station, which will have a 12,000 capacity.
It is being proposed by the controversial Islamist group Tablighi Jamaat, whose previous adherents include Glasgow airport bomber Kafeel Ahmed, shoe bomber Richard Reid and the July 7 bombers Mohammad Sidique Khan and Shehzad Tanweer.
The Christian Peoples Alliance is Britain's first political party of Christian Democrat inspiration and carries the support of sister parties across the European Union. With three councillors in London, the party has run twice for the Greater London Authority, in 2000 and 2004, winning votes both times from 100,000 people in the capital.
As well as backing from cross-denominational church leaders, the CPA carried support from leading members of other faiths and business figures. It has its annual conference today, Saturday 17 November, in central London.