Still confused on lerps...

You have a couple of issues here. They are common issues with questions on this list, but I rarely see them combined. Let me start by giving you some code that I think does you wanted. It is a partial rewrite of your code. I might approach the problem differently:

 #pragma strict
  
 var pulseUpSpeed :         float = 10;
 var pulseDownSpeed :       float = 10;
  
 var pulse :                boolean = true;
 var pulseDown :          boolean = false;
  
 private var targetScale:    Vector3;
 private var atRestScale:    Vector3;
  
 function Start () 
 {
     atRestScale    = Vector3 (40, 35, 0);
     targetScale    = Vector3 (68, 59, 0);
 }
  
 function Update () 
 {
  
     if (pulse)
     {
         transform.localScale = Vector3.MoveTowards (transform.localScale, targetScale, Time.deltaTime * pulseUpSpeed);
         if (transform.localScale == targetScale) 
         {
             pulse = false;
             pulseDown = true;
         }
     }
     else if (pulseDown)
     {
         transform.localScale = Vector3.MoveTowards (transform.localScale, atRestScale, Time.deltaTime * pulseDownSpeed);
            if (transform.localScale == atRestScale) 
         {
             pulse = true;
             pulseDown = false;
         }        
     }
 }

One issue with your original code is the 'yield'. A 'yield' means the processing stops at that point and control returns to the calling method (Update() in this case), but that processing will continue from the 'yield' at some future time. Typically you would call a function with a 'yield' (usually referred to as a coroutine) once and then allow it to do its work over a number of frames. You are calling it at each Update(). This produces a new coroutine each time the function is called. So you have many coroutines stacked up. Assuming your app is running at 60 fps, you stack up 12 coroutines before the first one finishes (given your value of 0.2 for pulse up speed). It is possible to write this code as coroutines, but this is not the way to approach it.

The second issue is Lerp(). The traditional use of Lerp() is to have the last parameter change over time from 0.0 to 1.0. That is you create a timer or increment a value so that over time the value covers this range. A non-traditional use, is to have the last parameter be some small value, but to update the starting point each frame. Your code does neither. Note if you update the starting point each frame, the result is an eased effect. For your application, I've instead use MoveTowards. This function can be though of as using speed rather than time to drive it and will produce a non-eased movement over the range without requiring the construction of a timer.