Ronald,
You are absolutely right. I got Local confused with another Search API we just shut down. Argh, sorry about that!
If you are not charging money for your app, nor running ads, I don't see how it could be a commercial app at all. Likewise, it looks like Local uses the standard Yahoo! TOS so I don't see any reason that it being a mobile app would make a difference. I can't give you a firm answer without seeing the app, but what you are describing sounds like it fits within the terms of service for that API.
Robyn Tippins
Community Manager, YDN