Yes,looping means to connect rts to cts with the hope of eliminating the flow control.
I wasn't thinking ,but the max232 should be enough to do the job.Remember the max232 is to convert the pic output to the 232 voltage spec only.One output for xmit data ,one output for rts,one input for rx data,and one input for cts.You will need to determine the flow control logic.Basically you will output a rts(pic) to cts (Yamaha) to get data from the Yamaha.And vice versa to receive data from the pic.To know for sure exactly what to do,experiment with a pc first.I use a program called simple terminal (http://www.bb-elec.com/product.asp?sku=simpterm) free from bb-electronics.With this program you can manually toggle the rts and observe what happens.