I recommend you to use the following SD Yocto image: http://downloadmirror.intel.com/24355/eng/SDCard.1.0.4.tar.bz2. In order to use this Yocto image, you only need to decompress the files and copy them into the SD card root directory. Please check the following site where you can find a step-by-step guide to set up this Yocto image: Intel® Galileo Boards and Kits — SD Card Setup and Sketch Persistent
Once you have set up the SD card with this image, try to reset an Arduino sketch again. You shouldn’t have any issues with it.
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Just a minor detail: take into account the differences between both Yocto versions: the one you have used and the one recommended by Diego.
The one you have used is intended to be used with XDK: "You can boot your Intel® Galileo board using a micro SD card that contains the latest Intel® IoT Developer Kit version of the Yocto* built, Linux image."
The one recommended by Diego is the good one, I think, for the purpose you have described: Arduino sketch persistency.