Outlook – In Outlook 2010, with IMAP settings Incoming mail server [localhost] demand username/password, Why

I am using Outlook 2010 for connection to Yahoo IMAP servers, via Bravura Software's Yahoo IMAP Connector http://www.bravurasoftware.com/yahoo-imap/configure-client.htm. The configuration is typical per their instructions.

Incoming Email Server Configuration
Server Type: IMAP
Server Name: localhost[127.0.1]
Port: 27143
Security: None/Plaintext
User Name: Your yahoo email address (e.g. example@yahoo.com)
Password: Your yahoo email password (e.g. password)

Outgoing Email Server Configuration Property
Server Type: SMTP
Server Name: *smtp.mail.yahoo.com *
Port: 465
Security: SSL —> this is in fact set to None (since Avast is handling encryption)
User Name: Your yahoo email address (e.g. example@yahoo.com)
Password: Your yahoo email password (e.g. password)

Additionally, I am using Avast Internet Security v6.0.1125 with the Mail Shield active. My problem is that upon testing the account I am greeted by an Outlook dialog thatt request a username/password to log into the localhost incoming mail server. Why? and what username/passwword would I even use? Where is this incoming mail server? How is it implemented?