Here's a recent thread about a dog having the neuter and the search for the undescended testicle. You could pm the Mom (carleirulesmes) and find out her experience.
They're neutering pups as young as 8 weeks old now, but I personally would wait. If your vet is uneasy he may not have experience with small pups. Make sure he uses isoflurane gas with no pre-anesthesia injection whenever you have it done and pay the extra for the preop blood tests. A lot of Yorkies need to have retained baby teeth extracted so that would be another reason to hold off and do it at the same time.
http://www.yorkietalk.com/forums/showthread.php?t=40193