OK, I'm almost done with this. I've used the layoutdialog to seperate the header and footer into different regions to keep them displayed, and the logs now scroll in the center region. Only other thing I have to figure out is how I can float the buttons to the right, and ideally, hide the collapse button altogether, and I'll be calling this done. Definetly more useable in this state than it was before though.

Edit: I've also gotten rid of assigning it to the window object, per advice given to me by Jack

Code:
YAHOO.util.myLogger = {
	init: function() {
				
		loggerDialog = document.createElement('div');
		loggerDialog.id = 'loggerDialog';
		loggerDialog.style.visibility = 'hidden';
		
		document.body.appendChild(loggerDialog);

		myLoggerDialog = new YAHOO.ext.LayoutDialog("loggerDialog", { 
			modal:false,
			autoScroll:true,
			width:500,
			height:300,
			shadow:true,
			minWidth:500,
			minHeight:300,
			center: {
				autoScroll:true,
				alwaysShowTabs: false
			},
			north: {
				split: false,
				initialSize: 40,
				alwaysShowTabs: false
			},
			south: {
				split: false,
				initialSize: 65,
				alwaysShowTabs: false
			}
		});

		var layout = myLoggerDialog.getLayout();
		myLoggerDialog.beginUpdate();
		var loggerPane = layout.add('center', new YAHOO.ext.ContentPanel('logger', {
				fitToFrame: true,
				autoCreate: true }));
		var loggerHeader = layout.add('north', new YAHOO.ext.ContentPanel('loggerHeader', {
				fitToFrame: true,
				autoCreate: true }));
		var loggerFooter = layout.add('south', new YAHOO.ext.ContentPanel('loggerFooter', {
				fitToFrame: true,
				autoCreate: true }));
		myLoggerDialog.endUpdate();

		myLoggerDialog.header.update('Logger');
		var myLoggerConfig = {
			logReaderEnabled: true,
			verboseOutput: true
		};
		var myLogReader = new YAHOO.widget.LogReader("logger", myLoggerConfig);
		var myLogReaderFooter = YAHOO.util.Dom.getElementsByClassName("yui-log-ft", "div", "logger");
		var myLogReaderHeader = YAHOO.util.Dom.getElementsByClassName("yui-log-hd", "div", "logger");
		loggerHeader.getEl().appendChild(myLogReaderHeader[0]);
		loggerFooter.getEl().appendChild(myLogReaderFooter[0]);
		myLoggerDialog.syncBodyHeight();
	}
};
YAHOO.ext.EventManager.onDocumentReady(YAHOO.util.myLogger.init, YAHOO.util.myLogger, true);