I wonder if YAML is better than JSON for LLMs, because the indentation keeps the nesting level information local to the content.

Author here. Short version is that YAML 1.1 behavior has a lot of bad, but the 1.2 spec addressed the major problems (way back in 2009!). I don't really know why PyYAML never updated to 1.2. So for the intervening years Python users kept hitting 1.1 bugs and blaming the format.