"To set up Yahoo E-Mail on the Motorola Droid:
Make sure Wi-Fi is turned off
Press the E-Mail icon (the default Android E-Mail application)
Enter your Yahoo E-Mail address and password
Press "Manual Setup" in the lower left hand corner
For "Incoming Server Settings" set the IMAP server to "imap.mail.yahoo.com" and the Port to 143
For "Outgoing Server Settings" set the SMTP Server to "smtp.mobile.mail.yahoo.com" and the Port to 587
Check "Require sign-in" and press Next
Select how often your Droid will check for Email, and choose default options
Give the account a name and set your display name for outgoing messages
Done and done. You’ve now got Yahoo Mail on your Motorola Droid and it will work with the all-new "Combined Inbox" in Android 2.0. Beautiful."
Copied from another Droid forum. Hope this helps.