Replacing /usr/bin/python (or anything in /usr) is a bad idea, since
Mac OS probably expects that to be a particular build of python. If
it's not, your system could have issues down the line. You should make
sure /opt/local/bin precedes /usr/bin in your path, and you should use
python_select (from Macports) to select the 2.6 version of python.
Also, you should be reinstalling yaml after doing all of this.

I made sure /opt/local/bin precedes /usr/bin in my path. When you say use python_select from Macports, I'm assuming use the python_select located at /opt/local/bin to select python26 which I did.  I also installed py26-yaml using macports. Now instead of running easy_install, I ran easy_install-2.6 -U pyyaml which surprisingly ran without problems indicating PyYAML 3.09 is already the active version in easy-install.pth. However, I ran rosinstall after this but it still was not able to import yaml. 

When you say I should be install yaml, are you refering to libyaml on macports (which I did) or py26-yaml on macports (which I did) or easy_install pyyaml (which gives the error indicated in the first mail) or easy_install-2.6 pyyaml (which I did and gives output which I've explained earlier).

Thanks,
S.