The biggest problem is that there are no real repercussions for ignoring yellow flags and ending up in an incident as a result, unless it's a league where you get whacked upside the head for doing such.  A better / real damage model would help the overall situational awareness.
 
The other problem, is it's just YELLOW FLAG in LFS.  It makes no difference.  Most times LFS throws a yellow, it would be a yellow (at least if I were the marshal) - but some would be a standing yellow, some would be a waved yellow, some would be a fast-waved single-yellow, and some would be frantically waved double yellows.  If there was a system of different types of yellows to indicate severity, that would help.  
 
You wouldn't necessarily slow down for a held / standing yellow, that coudl just be indicating a car slow, but going the right direction on course.  A double waved yellow would indicate that there were 2 or more cars actively spinning / wrecking on / near the racing line.
 
No matter what though, using "Driver should have shift+sed!!!!!!!" is no excuse for your failings to see / heed warnings.  You can't shove the responsibility on a system that is suceptible to being delayed by joiners, other spec'ers etc.