the tag said to 'water frequently until established.'

I have no idea what that means in regards to this plant.

Should I water when the soil's dry, as I would if it was in a pot in my house, should I avoid watering it, or some third option I can't think of.

I've watered it twice in the past week. The lower leaves have been turning yellow. I'm not sure if this is becuase they are touching the wet soil, or if I'm underwatering. The base of the leaves don't show any signs of rot. The leaves that are standing look fine.

thanks for your help.

Yuccas develop DEEP tap roots and don't need watering in year two and beyond. The yellowing is probably due to transplant problems and excess watering. If you have heavy soil, water less than outlined above.