Vijay,
Thanks for your suggestion. Adding text into the file did work, i.e. the domain verification step succeeeded.
However, later on, when I use the Contacts API, I still get "Warning: This website has not been verified by Yahoo!. For your security, we recommend that you continue only if you trust this website."
Maybe the verification status hasn't yet reached all Yahoo servers. I'll check it again in a day or so.
Thanks,
Nav