Pokemon Yellow follows the actual story line for the first season, up to a certain point. Due to the episode where he battled Lt. Surge and lost, Surge suggested he should evolve him using a thunderstone, Ash thought about it, and actually got a stone but Pikachu refused it, oodly enough, he won the second time around, so Nintendo decided to make it so Pikachu can follow you through out the game, so evolving him would conflict with the story, and make it just another Red/Blue copy, having Pikachu follow you and not being able to evolve him is just trying to follow the ACTUAL story line, it's like this to test your training skill and bassically your patience, not everybody sticks with a Pikachu for a whole game, Nintendo just wanted to make Yellow the ultimate Kanto-based game, until Fire Red and Leaf Green that is...
Get Your Game On!