In essence, del.icio.us was/is a popularity machine. By aggregating user-activity on links, it allows both a real-time and historical perspective on what's popular/interesting online. Tags let you dissect this by subject. What was always missing with del.icio.us was the mass-market, which is exactly what Yahoo! brings to the table. While the concept of social bookmarking may be a stretch for mass-market users initially, you could certainly market the product's usefulness (and implement additional privacy features) to make it more friendly to mass-market users. "Be a better: Bookmarker"
But links are also sent by email. You could integrate del.icio.us into Yahoo! Mail and automatically bookmark all of the links that are sent/received. Wouldn't it be nice to have that archive of funny links from Uncle Frank in a tagged, searchable repository? Do the same with Yahoo! Messenger. Plug it in to Comments on articles and bookmark articles that people comment on. Use del.icio.us as the mechanism behind favorites and sharing for all Yahoo! properties. With those integrations, you get mass-market activity-based-popularity and that's incredibly valuable. Yahoo! would be the source of truth for what's popular online, and could use this as a competitive differentiator with Google. "They are the machine, we are the voice of the people" etc.