I run pidgin on my windows machines because, I basically hate the bloat of the official Yahoo Messenger and because I also need google talk. For a few days I could not connect to Yahoo. Going to Manage Accounts (CTRL+A) -> your problem yahoo account -> Advanced and changing the server to
cn.scs.msg.yahoo.com solved the problem for me.
Another reason to hate Yahoo, yet people seem to love it, and I need a way to chat with them too.
Update: Pidgin 2.5.7 seems to solve this problem.