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SOLVED for me.  My  problem was on my droid.  'Coudln't connect to server' error. 

Another link told me to install a 3d party yahoo mail app.  I tried it.  The 'hidden and VERY EASY solution' was HIDDEN in that install.

It wouldn't let me install untill my Yahoo account was 'updated'.  Strange, since I've been using it on my laptops.

But, I tried what the app wanted:  Go to 'login.yahoo.com'.  I did.  ALL IT WANTED WAS MY PW.

And I usually see that same screen every so often on my laptops.

Anyway...I went back to my ORIGINAL attempts at setting up and getting my e-mail and IT NOW WORKED!!!

I've since removed the 3d party app as I didn't want all of Yahoo home, just my e-mail.

Don't know if it'll work for you, but it did for me.  As to why ATT/Yahoo can't figure out their own solutions is still very unsettling.