Don't get into language wars when you're trying to sell a product. Obviously, Java applets work for yahoo and for the people who use yahoo games, so people are evidentally able to tolerate "bloated nightmares".
Applets have clunky startup/shutdown processes. That's their main problem. Aside from that, they duplicate the desktop experience quite accurately, unlike Ajax, which is a permanent kludge.
Plus, how else are we going to play Kid Icarus without applets:
http://www.davieboy.net/play/game.all.play.asp?rom=11.zip...