I too have been afflicted by the rejected password syndrome when using my desktop email client with Yahoo's IMAP server. The real answer to the problem has been skirted around in several of the messages here:
Yahoo does not strictly support desktop email clients with their IMAP server. This is the reason for the intermittent nature of the problem. If you change back to using the POP server, I think you will find that you will have far fewer, if any, issues with your email password being accepted.
I am not going to wade into the battle about whether this is a good or bad thing. I only know that I tried using the IMAP server and it was all good for a while and then I started getting continual rejected password errors that would not go away no matter how many times I changed my email password at Yahoo, deleted my server entries in my Keychain, recreated my account in my email client, deleted my email preferences or any other voodo trickery.
I only know that when I changed back to using the POP server I stopped getting the errors.
If you are in the AT&T Yahoo family you can try these servers (these are the new AT&T servers):
POP: inbound.att.net port 995 | SMTP: outbound.att.net port 465 |
SSL is necessary with both POP and SMTP
Also, the following old servers should work, as well:
POP: pop.att.yahoo.com port 995 with SSL
SMTP: smtp.att.yahoo.com port 465 with SSL