Yes, you would set your site up on the local server.
What I end up doing for the connection is editing it in Dreamweaver, insert the correct details for the remote yahoo MySQL server, then upload it to the server.
Once it is uploaded to the server, Set the View drop down in the Dreamweaver files panel to Remote Server. Right click the connection file and select the Set Permissions option. In the permissions panel clear the Write attribute for all users.
Now change the files View option back to local, and edit the connection back to your local settings.
This way the remote connection will connect to the remote server, the local connection will connect to the local server and by clearing the write attribute, Dreamweaver will not be able to overwrite the connection.
You may get warning messages that Dreamweaver failed putting the connection, but those can be ignored.