By all means, apply to Y Combinator. Its not that hard to do and you don’t have anything to lose.
We at nderground applied to Y Combinator and didn’t get in. Getting into Y Combinator is about twice as hard, statistically, as getting into an Ivy League school. Just to set expectations.
What Y Combinator delivers, more than anything else, is a path to venture capital funding.
nderground has not followed this path and I think that this might be a good thing. There is a huge amount of pressure for quick results once you accept venture capital money. It can take a long time to build a social network and a group of users. Not all applications worth building go viral.
Venture capital is often based on a grow explosively or die approach to companies. This doesn’t always happen. It is very difficult to tell whether something will go viral until it does.