Why don't DUPLO figures have yellow skin? Normal LEGO minifigures have yellow skin in an attempt at being racially neutral.

Why do (modern?) DUPLO figures use normal flesh tones instead of yellow skin? (Set 10895 aside, which has DUPLO versions of LEGO characters/minifigures... although that does raise another, related question: have there ever been other DUPLO figures with yellow skin?)
This is an excellent question. Here's my best guess as to why this is. 

As you've pointed out, LEGO System Minifigures were made with yellow heads from the start for a specific reason. On Lego.com it states:


  We chose yellow to avoid assigning a specific ethnicity in sets that don't include any specific characters. With this neutral color, fans can assign their own individual roles to LEGO minifigures.


The very first LEGO Minifigures were made with yellow heads and the first Duplo figures were made with white heads. These were both released at about 1975-1976. Now while the Duplo figures did start off with less racial ambiguity, the Duplo line was quick to introduce the first LEGO figures with realistic skin tones, which were released in 1983. LEGO did not do that with the System figures until 2003, twenty years later.

The LEGO Duplo sets are for toddlers under the age of five, and therefore, these sets include a lot of bright colors. Just look at any Duplo set and you'll see what I'm talking about.


Why does this matter? Well, yellow is a color commonly used in Duplo. It is possible that having a primarily yellow set and a figure with a yellow face might be a bit weird for a child. It also makes the figures stand out from the pieces in the background and might make the set more appealing to a Grandparent, for example. "Oh look! There's cute people in this set!" All of that to say, yellow figures might blend into the primarily yellow Duplo sets.

Additionally, Duplo is for very young kids, and it's probably best to not confuse them and make them wonder why there aren't people with yellow skin in the real world. By the time the child is old enough to move onto System, they already understand what people in the real world look like, and they won't be confused by the yellow heads.

Please keep in mind that this is just my best guess.