I have spent some time on debugging why the creation of an OAuth app fails... And I have found a really annoying bug resulting in an "internal error".
It seems like if you have Yahoo in your application description then the creation of the application fails.
Other than this, there is also an annoying bug with the domain verifier that I can't debug why happens, but basically it throws following error: Domain Verification Failed: There was an internal error while the application was created. Please try again.
The issue with Yahoo or Y! being restricted within the title or description was most likely the cause of that error message you saw. I just looked through our bug tracking system and there is a bug open to add better error messaging for specifically this issue. We should hopefully see these changes made within the next few platform releases.
Thanks for letting us know.
Jonathan LeBlanc Technology Evangelist Yahoo! Developer Network Twitter: jcleblanc