Per yaml page https://yaml.org/faq.html they recommend .yaml as file extension but I see drupal uses almost exclusively .yml, how so? And does adding .yaml to file extension even work for drupal 8 or will it be skipped?
Drupal uses '.yml' because Symfony uses '.yml'
This was discussed in https://www.drupal.org/project/drupal/issues/2091669
I am assuming that '.yaml' would not work, but I haven't tried it. For consistency reasons it is best to stick to '.yml'.
EDIT: Looks like Symfony has started recommending '.yaml' from version 4.0. Can be seen by comparing this page https://symfony.com/doc/4.0/routing.html with the 3.4 version