<<We all know that if you have a reverse loop, it has to be longer then the
length of a train with lighted cars.>>
<<I have a situation where a yard is part of a wye. This yard will have
lighted passenger cars or a caboose with markers.>>
<<My thinking is to is to isolate the whole yard with the wye and use a
reversing circuit breaker to control it.>>
Don V. has given you a couple of good answers, they'll both work just fine.
There are, however, easier ways to handle this situation.
Your thoughts and Don's responses all center around reversing the yard on
that end of the wye.
Depending on how the other two legs of the wye connect with the rest of the
trackage, it may be easier to easier to use one of the other legs of the wye
for your reversing section.
Here's a simple example:
1) take a piece of paper and draw a large circle on it. At 11 o'clock and 1
o'clock, sketch in the two turnouts that split off the main and lead to the
yard you describe. Bring them down into the center of the layout, bring
them together at the third switch of the wye, and draw the yard below that.
2) Let's call the turnout at 11 o'clock turnout "A", the turnout at 1
0'clock "B", and the turnout that leads into the yard proper "C".
3) Cut double gaps between turnout "A" and "B" and "A" and "C", just to the
right of the frog of turnout "A".
4) Now move one train length counter clockwise from turnout "A" and place
another set of double gaps there. The length of track from this set of gaps
clockwise toward the two sets of gaps just beyond turnout "A" is your
reversing section. It's one train in length, and the resulting gaps are not
likely to be violated by another train.
Take the time to sketch it out - it works pretty good.