I read the WP's reaction as "not surprising", largely because LTK - and by extension the WP - is known to view the mainstream media as the PAP's propaganda wing [of course, he is right to have this view] and largely circled the wagons. Of course, if party members are still walking the ground and listening to feedback, the party might have a better feel of the ground on how the public feels about the whole matter rather than caving into what pressure being created by the media.
As I see it, it will be an overreaction for WP to ask Yaw to resign as MP and then call for by-election.
I agree with you that Yaw should not be made to resign now. No doubt, he is a bumbling idiot for not being able to control his hormones since he is holding a postion which is considered to command high moral authority. He should serve till the end of the term and the WP should decide what to do with him then. The simple reason is that the moment he resigns, there is no assurance that there will be a by-election in Hougang since from experience, the PAP has never allowed by-elections to be held for decades (Bukit Batok - Dr Ong Chit Chung and AMK - Dr Sadasivan are examples). In fact, the moment Yaw resigns, the PAP will move in their people (adviser to RC or whatever) to take charge by giving whatever stuplid excuse and when 2016 comes, they will have the upper hand and thus win Hougang. So, Yaw must not be made to resign, no matter what. Mark my words, no by-election will be held.