You are still on BTYahoo mail as are many of us.
If you go to Settings > More Settings >Switch to basic mail you can change the sort order. Don't know if that carries over when you revert to 'Newest BTYahoo Mail' but basic mail interface is preferable in any case if you really must use webmail.
Hi, I also had this problem:
I switched to basic mail and sorted by Last name with the drop-down menu but NOTHING happens...
I have more than 2k contacts, so maybe it takes a while... but when I try to edit any single contact I see that the "surname" has been merged into the "first name" and the surname field is empty...
Can you help ? How can it have happened ?