I picked a Windows 7 VM and installed Yahoo Messenger. The version I have is 184.108.40.206 - not sure if this is the version you are using as well.
I observed the following. Yahoo Messenger uses the proxy configured in the System (Internet Explorer settings) to obtain the IP address of a login server. Then it talks to this login server on port 5050. When I enable MWG in the IE settings as a proxy, Yahoo Messenger still talks to Yahoo directly. As soon as I enable the "Yahoo Proxy" MWG will automatically rewrite the login server to the IP address of MWG. Then Yahoo Messenger connects to MWGs IP addres son port 5050 and starts talking Yahoos IM protocol. MWG openes a connection to the original Yahoo Login server and forwards the communication.
Unfortunately I cannot test any further because luckily port 5050 is blocked for me, so MWG cannot talk to the outside world. Maybe you can just check if you have MWG configured in the IE settings and enabled the Yahoo Proxy. You can also enable Connection Traces in the Configuration -> Troubleshooting section and try to connect using Yahoo Messenger (then DISABLE the connection traces again!). You should see some HTTP communication and how MWG obtains the login server (in the S-Trace which represent MWG<->Server communication).
MWG obtains something like this:
The corresponding C-Trace (representing MWG<->CLient communication) indicates the modified login server:
where 10.140.x.144 is the IP address of my MWG. Shortly after this is done you should also see a Yahoo-* connection trace which shows the Yahoo proxy communication. That one is empty for me because MWG cannot get out to Yahoo, but for you it should show some data. Maybe there is already some helpful content in there.
I am trying to get the firewall opened up for me, but maybe these hints help you to get started.