hello...
you posted awhile ago but in case your still looking here is a site with a list of yarn stores in NYC:
http://www.woolworks.org/stores/ny.html

i haven't been to any personally, but i live in northern nj and the LYS i go to are also listed on the site so there might be a few good ones to check out

hope that helps!

There's one on Avenue A, Downtown Yarns between 4th & 3rd Sts, that is very good.  They have a good selection & everything is priced.

Knit NY on 14th St. @ 2nd Ave is okay, too.  They have finished garments that you can buy the patterns for and you can borrow needles and buy yarn to do your project there.  Whatever.  I found them a little snooty.  The girl who rang me up was working on her own project and instead of being helpful, acted impatient to get back to her own knitting.  "Are you ready YET??"

The Point, 37A Bedford (Between Carmine & Downing) off 6th Ave in Greenwich Village was very nice. They have snacks and beverages available.  Most of the yarn was priced and they asked questions and were helpful.  A lot of the yarns were displayed 10 feet above eye level and it felt intrusive asking to see or feel it, though.  They must have stock down below somewhere, I didn't see any ladders around.  

Extremely snooty is Gotta Knit on 7th Ave near 13th Street.  None of the yarn or anything else was priced.  You have to ask and it's all $60 a ball angora & such.  I guess everyone is supposed to be so wealthy that there's no need to ask, just choose what you want.  When I mentioned that I crochet (I purchased crochet hooks, a Susan Bates set which I also had to ask what the price was) they were very snotty and one of them said, "Knitting uses less yarn than crochet"--like I should knit so I could afford their overpriced yarn.  I will not return there.

I have not been to Purl in Soho, but I have heard similar things about it, that make me not want to go there.   I can't stand this "We're hipper than you" or "We use better yarn and more expensive ebony knitting needles, unlike you" attitude.  I worked at a record store for 8 years, I know about humbug snobbery (we didn't act that way) and that type of attitude is really insufferable to me.  

I look forward to checking out the shops here in Brooklyn where I live.  I have a feeling they'll be serving assistance rather than attitude.  At least I hope so.

Here's a weblink with lots of info:
http://groups.msn.com/VonsCrochetCyberspace/shopforstash.msnw

I know this post is, like, ancient but I thought I'd add anyway...

I've only been to two yarn stores in NYC; I like one and not the other.

First I went to Knitty City on the Upper West Side (I think it's 79th and Amsterdam...could be 78th) and thought it was great.  The woman working was incredibly helpful, she not only went into their store room to see if they had additional skeins of the colors I wanted, but she called around to other shops to see if anyone else had it.  Then she offered to order it for me (no one had it - augh!). The whole time she was very polite and helpful, I didn't once feel like she was irritated to be helping me or that I was a burden.  There were a few people sitting at a table in the store knitting  (maybe a small class?  I don't know) but they didn't make me uncomfortable, I didn't feel like they were watching me or that they didn't want me walking around them.  Plus I felt their prices were reasonable.  All in all, it was a great LYS experience and I'd recommend the place to anyone.

The Point Knitting Cafe was pretty much the exact opposite.  Complete snobfest.  When I asked if they carried plastic needles, the employee could barely contain her contempt at the idea.  Their needle and notion selection was terrible, I couldn't even find a plain snap for the bag I had made, which was the primary reason I went in there!  Not to mention that everything was ridiculously expensive.  Plus, I felt like the people sitting at tables were watching me the whole time I was in there.  The atmosphere was very cold and uninviting.  I regret that I actually bought anything (overpriced needles) and didn't just leave and head uptown to give my business to a friendly and warm shop that deserves it.

Haven't tried any others yet, but I may stick with Knitty City since it was so nice and it's close to work.