It sounds as if you might have set up the account with 'My server requires authentication' ticked, when it's not actually required.
Go to Tools > Accounts > Mail
Click on the Yahoo account to highlight it.
Select 'Properties' and the 'Server' tab.
Unless the Yahoo instructions specifically stated that it was required, there should be no ticks in either of the boxes (i.e. next to 'My server requires secure password authentication' or 'My server requires authentication').
Remove any unnecessary ticks, click 'Apply' & 'OK'.
Chris