If the motor was running at a fast idle and the two yellow wires were unloaded (not connected to the regulator) then the stator is kaput.Yes the engine was running when I checked the yellow wires.
Yellow wires from the alt are before the reg/rect , but if one had the meter set to dc while testing an ac output the meter would show a reading and depending on the dampening function on a particular meter you may see a reasonably stable reading ....however wrong it was .I do not think you should have gotten any DC voltage on the yellow wires. The rectifier in the VR would have prevented that. You might check your voltmeter dc scale on a known DC source, like the battery.