The Yahoo widget gallery used to contain a widget converter widget that you could drag and drop your widget's folder structure onto in order to package your creation into a .widget file, or vice versa. Due to changes in how the engine opens and runs widgets however, the widget reference manual advises against the use of the current converter, which is why it's been removed from the gallery. Instead, there is a command line tool included in the SDK download that will handle all of your packaging and unpackaging needs.
Unfortunately, while the reference manual lists the available commands, neither the manual nor the tutorial offer any instruction on the use of this command line interface. I managed to work out how to unpack a widget bundle into its constituent parts by trial and error, but as of the time of writing, I haven't yet converted a widget folder hierarchy into a flat widget file. If Yahoo wants more people involved, it must either improve the instructions for use included with the command line converter, or upgrade the converter to deal with the new runtime methods.
Additionally, there is no guidance on how to transform your creation into that trademark black glass effect, although as pointed out in the walk-through, you can always unpack any existing widget to see how the graphical elements of widgets are presented, or make use of the excellent Photoshop widget making script (if you have Photoshop, that is).
Aside from these two points, the documentation included is first class; it is well presented, clear and concise and gives people not just an introduction into the world of widgets, but also a very basic crash course in XML and JavaScript for those that are new to these languages too. There is also an extremely comprehensive reference manual, which gives definitive examples of every single XML tag used in widget programming. Both of these documents have been produced by Yahoo, who has the time and resources to include additional extras like these to help build a community of developers, exactly as envisioned by the original creators.