As a yoyoer and a weapons and history buff, I have heard this many times. Historically, it was just a rock with a rope around it being dropped from a tree, but that is not good enough for people. So I did an experiment to disprove the notion.
In order for the yoyo the be an effective weapon in it’s own right, you need a looping yoyo. I happen to have one made out of wood, which I used for this experiment. (I also duplicated this experiment with a modern looper). I put basic leather armor on my brother, and began hitting him with my loops. (Leather/hide is a generally universal armor, and almost every culture has used it, despite what you see on movies) Not only did he sustain ABSOLUTELY NO DAMAGE WHATSOEVER, but the impact made it extremely difficult to loop. Many times, the impact would stop the yoyo immediately, and it would just be a weight on a string. With a modern looper, it was easier to loop, but not by much, and still with no damage being dealt. The impact still killed the yoyo spin, making it simply a weight on a string.
I, then, showed how easy it was to disable a person using the yoyo as a “weapon.” Here is what you do: you put your arm out. The String then wraps around your arm. Because the other end of the string is connected to a finger, the defender now has complete control over the “yoyong” hand instead of the yoyoer. Not only will his weapon be useless, the yoyoer is now at a disadvantage because he/she has lost control of the limb and stance, making their defense weak.
A simple stick is a more effective weapon than a yoyo, and it takes less energy and resources to create an army of stick welders than an army of yoyoists. Deadliest Warrior: Yoyoist Vs. Guy With a Stick. Guy With a Stick wins.
A yoyo still can be used as a weapon. It is most effectively used by simply staying in your hand. You can use it as a bludgeoning tool. Or you can trow it really hard. Basically, a yoyo works best as a weapon when you treat it like a rock. But, again, it is much more economical to arm men with rocks then yoyos.
In short, almost anything makes a better weapon than a yoyo. For over 2500 years, a yoyo has been a toy. Just like a Barbie doll, you can physically hit someone with it, and use it as a weapon. But, it is no more of a weapon than Malibu Barbie. (Actually, those Barbie high heels make pretty good caltrops)