Hi Peter - your correct, when deleting an email account on the iPad, the warning that the data (emails, contacts, etc.) 'on the device' will be deleted; now, how this impacts on one's main mail server will depend on the incoming email protocol being used, i.e. POP3 or IMAP - POP will download your messages from the main server, whereas IMAP sends a 'copy' and keeps the original (like a cloud service) - not sure 'how' your account is configured.
Now concerning your Yahoo account, the password should be the same as you would use on the web-browser client - have you tried to just 're-enter' your current Yahoo password into the iPad's account settings? Also, if not already done, you might want to review Apple's 'troubleshooting guide' for the Mail App
HERE - good luck and hopefully others who have had similar problems will chime in - Dave