First off, yarn can be used as a substitute for chenille in any fly calling for that. All those woolly buggers can be tied with yarn bodies. It can also be used in wet flies & nymphs, too. Simply separate the stands of the yarn (it's usually three stands twisted together) & use one strand of it as you would chenille to wrap about the hook. It's good practice when using yarn in place of chenille, to secure it down with wire or tinsel, wrapped in the opposite direction. Otherwise, it's fine. If you're making a body that's palmered with a hackle feather throughout its length, such as the woolly bugger, then that would work as well.
In addition, you can make your own dubbing out of yarn. Yep, that's right - all that yarn you see in the stores can be turned into bags & bags of dubbing at a fraction of the cost for normal dubbing. Plus you can mix different colors together to get the exact color you need. This is perfect for matching a specific local hatch, or for those rare fly patterns where dubbing from a catalog just won't do. Now you can make your own colors.
To do this, you basically cut the yarn into small pieces & put them in a coffee grinder. You use the coffee grinder to shred the yarn into dubbing. Again, you're not spending much money here, as you can get a coffee grinder fairly cheaply. Just be sure to dedicate one only for dubbing blending - you don't want coffee oils & smells on your flies!!
Here is a short, direct video that's straight to the point showing you how simple it is to turn yarn into dubbing with a coffee grinder:
Acrylic, wool, synthetic wool, or any other type of yarn you see at the store can be used these ways. So the next time you're in a big chain store that sells yarn, stand back & look at the wall of yarn & know that you can turn all of that into dubbing for your flies!!!