By "back" here, do you mean the direction in which the unit moves or the type of making way (aside/back)?
Direction.
Now to the bit of rules (I know it's playing with words and implying, but how else to analyze text):
Is it the red unit (driven back) or the blue unit (making way) that would force yellow to make way?
You're starting to lose me here...
Red being driven back causes blue to make way, which in turn causes yellow to make way. So your first option. This is also supported by how movement works in Warmaster, one unit at a time. When a unit's drive back/retreat is blocked by a friendly unit the player has three choices:
1) don't make way for the original unit and let it becomes confused/destroyed
2) make way "aside", move the shortest distance out of the drive back/retreat path
3) make way "back", move with the original along its path
When making when this might require other units to make way. If so, you resolve those first and come back. In programming we call that a stack: last in, first out.
I know it's not described in the rules. But then, the rules cannot describe every possible scenario.
The following two bits of rules could mean that the blue unit cannot move. But I don't think so.
"A unit forced against unyielding friends halts on contact and becomes confused."
I think a unit making way is not forced to move into the yielding one. It's intentional move.
Units that are engaged in combat, constricted by terrain or unable to move for whatever reason cannot make way.
None of the conditions mentioned applies to the blue unit.
So I found suggestions that it can choose to move back, but none that it cannot.
And now I'm lost.
