This also confuses me: firstly, because of naming these features "raise selection" and "lower selection" which differs from every other application that I've seen which uses this feature.
I can't remember if this was different in previous versions of yEd. But it's in any case a very common feature across all diagram editors and a great many graphics packages (varying from Adobe Flash to Oracle Forms Builder) to offer four options: 'Send to back', 'Send backwards', 'Send to front' and 'Send forwards'.
Using these four you can layer your objects easily.
It'd also need a keyboard shortcut, because if you want to push an object down over multiple layers it is extremely awkward to have to do this using your mouse and the menu.
But for the rest I find yEd a great diagram editor. I especially love the layout hints, that's extremely usable.