During Nintendo's Wii U Direct back in January, a number of brand new titles were announced and teased in various forms, yet aside from the new Zelda Wii U and the Fire Emblem / Shin Megami Tensei mashup, Yarn Yoshi was the only title from that broadcast to not be mentioned or shown in some form during the E3 Direct.
As part of an interview with Takashi Tezuka, IGN sought an update on the title and its status; as expected, Tezuka confirmed that it didn't feature as it wasn't ready to be shown off. With that in mind, it seems likely that mid to late 2014 is realistic for this title, unless the development team at GoodFeel go into overdrive. Yet with a busy lineup for the rest of 2013 and titles such as Mario Kart 8, Monolith Soft's X and Super Smash Bros. all pegged for next year, Nintendo is building up a decent first-party collection; Satoru Iwata has also promised more unannounced third-party games for Wii U.
In terms of why GoodFeel was approached to produce this title in the first place, Tezuka's reasoning is simple — he liked the studio's work with Kirby's Epic Yarn.
I looked at [Epic Yarn] and thought it was really beautiful. It seemed like it would be a good fit for Yoshi as well. We found that the Wii U would be able to make it a much more expressive game. It looked like it would be a lot of fun.
Tezuka also provided assurances that the team is looking into the title's difficulty balance, after some accusations that Kirby's Epic Yarn was 'too easy'. Apparently the words used were all about balance, finding the right structure to challenge experienced gamers without excluding others.
In any case, Yarn Yoshi has potential based on its theme and developers alone; we'll hopefully see more of it in the coming months.