what is the rectifier for?

A rectifier converts a/c voltage from your stator to d/c voltage to your battery 

so where does my my yellow wire hook to?

The blue runs off the mag lighting coil in a long convaluted way via the switch, so if the regulator yellow goes into the blue it controls the headlight & instruments plus tail light where i am in NZ but US models might have a DC powered tail light, not sure.
No matter the regulator will save headlight & instruments.
Just a note though, the blue is only live when the motor is running, same with headlight--& probably/maybe tail light.

ok thanks so I splice the yellow wire into the blue wire?

edit:  I see you mentioned yellow from the regulator.  my mistake.  I thought you were asking about the headlight.  I'll leave the info below for reference purposes.

The yellow headlight wire, the high beam, is powered directly by the HI/LO beam switch on the handlebars. This connector is in the headlight bucket. Note, also in the bucket is a connector to the HIGH BEAM indicator in the instrument tachometer.

The blue wire going to the HI/LO beam switch, from the on/off switch for lighting, is switched to either the yellow (high beam) or green (low beam).

I just completely rewired my 74 360, though I did use a 12V VAPE system. Stock, I had a 6V system with no regulator from Yamaha. My 74 DT125 does have a 12v regulator.

If you had a regulator in the headlight bucket, looks like some previous mods or maybe the 360 had a regulator in some locales and others not.

JSMITH, try downloading and reviewing the DT400B or C wiring diagram on this site. It will clear up a few things for you and is easier to read than the 360 wiring diagram. Its almost identical.

Thanks, I think I understand now. I am printing this out and taking it out to my shop.