Great post SpDyKen! I've had my eye on a newer YZ125 but was unclear on whether the differences were that great between the 05's on up. I will probably start keeping my eye open for a nice 06.
That said, Blink... I'd say, if you can afford a new bike, by all means buy a newer bike. If you can't, don't hesitate to look at the steel framed YZs. I have a 01 YZ125 and can vouch for it as a solid bike.
Also, a couple of my buddies ride KTM 2Ts and I can also vouch for their solid power, impressive parts list and reliability. Don't shy away from a KTM if you come across a nice used one. They are NICE bikes.
Just don't get too caught up in aluminum vs steel frames. Find the cleanest, well maintained YZ or KTM that you can afford and you'll be happy.