This is great idea.

Personally, I hate yahoo groups for anything. I tried freecycle once or twice, but yahoo groups sucked so much that I dumped it, and I’ve never stuck with anything else that used yahoo groups either.

And your instincts are right — building a re-use network on a proprietary silo is an impedance mismatch.

When I want to give something away, I use craigslist — still very, very simple, but a step up. At least you can remove posts!

Craigslist is centrally run, and pretty limited in terms of features (moderating, rating users, etc), so I like your idea.

As for scaling — maybe building it on a cloud service is the way to scale — you could build it on Google App Engine, and get free hosting and full scalability. If Google changes things, you may be hosed, but your code is still yours, and you could port it to another platform. If you use Djago, for instance, you could run it anywhere with few changes.

Maybe some of the other cloud services would be worth checking out, too.