@SMickey,
One use of 'could' is to indicate possibility. Sentence (1) is incorrect, not because of the use of 'could', but because of 'yesterday':
"They could reach the top of Mt. Everest today/tomorrow."
"You could go to university next year if you get good grades in your high school exams."
Here, we are talking about possibility in the future.
We may not know, but we can speculate what might have happened in the past:
"If the weather was good, they could have reached the top of Mt. Everest yesterday, and be on the way down."
"If I were a bird, I would be able to fly."
Since we associate birds with being able to fly, it doesn't really make sense to say:
"If I were a bird, I could fly."
Why is this only a possibility? The whole reason to imagine oneself as a bird is to be able to fly.
It makes more sense with 'could' if the sentence were:
If I were a bird, I could fly home from school instead of having to take the bus."