I dont think drivers are confused by flashing bicycle lights either (they learn pretty-quickly what they represent). Anyway, being confused isn't necessarily a bad thing since they are aware of a thing to be confused by it. I suspect that some collisions are due to drivers being aware of the cyclist too late (later than they need to be able to avoid the cyclist).
The longer the distance that something can be noticed increases the likelihood that it will, in fact, be noticed.
Another reason is that yellow-green appears brighter to the human eye.
http://en.wikipedia.org/wiki/Color_visionA range of wavelengths of light stimulates each of these receptor types to varying degrees. Yellowish-green light, for example, stimulates both L and M cones equally strongly, but only stimulates S-cones weakly. Red light, on the other hand, stimulates L cones much more than M cones, and S cones hardly at all; blue-green light stimulates M cones more than L cones, and S cones a bit more strongly, and is also the peak stimulant for rod cells; and blue light stimulates S cones more strongly than red or green light, but L and M cones more weakly. The brain combines the information from each type of receptor to give rise to different perceptions of different wavelengths of light.