A recent series of changes at Yahoo have made the Yahoo Messenger portion of Pidgin misbehave. There have been various workarounds (such as using some of Yahoo’s non-converted servers), but finally the ‘proper’ fix is in the pipeline.
I just did an Ubuntu update, and it included the patch that has been working through various versions. Thanks bigtime to the Pidgin team and the Ubuntu maintainers for backporting the fix into Ubuntu Jaunty.
For full details on the patch, see this page which discusses the issue and gives good suggestions.