If you changed the server address before you updated (the primary quick
fix) then your settings were probably carried over to 2.5.7 and the
particular address may no longer work. I ran into this issue this
morning and changed the server back to scs.msg.yahoo.com and it now
works. Could someone tell is if the new version use a different address?

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Yahoo server authentication changed: Pidgin =<2.5.6 will not connect to Yahoo! 
servers.
https://bugs.launchpad.net/bugs/389322
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