When I turn on the rear defrost the radio loses reception. is there a short between the radio antenna and rear defrost

I am assuming that you mean that you are receiving interference on your radio. (Your description is very unclear.)

Window-mount antennas are notorious for bad reception and allowing interference. Your best course would be to mount an after-market external antenna on one of the fenders.

The other option would be to replace the stock Yaris radio (which is very poor quality) with a BETTER after-market radio.

I would check the connections on the grid, if they are ok you have to live with yagi effect.

Sounds like the dealer may be correct to me, but make them guarantee the job.

Between the rear passenger window and the back window is a junction where rear defrost wiring and radio antenna connect. Rear defrost wiring becomes loose and burns this unit out. when looking for replacement at salvage yard everyone of them I found had burned up. Lots of La Sabres w/o working rear defrost. I made solid connections for defroster, and added an antennae, not much point in repeating a system that will fail again.

Pull radio and check antenna plug in rear of radio, They'll still pull AM with antenna unplugged

you need to pull radio (or access rear of radio and make sure antenna lead hasn't come loose. Not only for your reception, but it also acts as a ground.

The antenna is part of the back glass. The antenna wires to pick the reception up are the same ones that defrost your rear window in the glass. You can check the connections behind the back "C" pillar posts. If the grids are broken this will reduce your reception.

AM is reflective, FM is not. Best reception is always FM because of this reason. Reflective AM bounces off everything - buildings, trucks, houses, power poles, etc and cause 'shadow' RF which confuses the the radio's AM tuner. However, if this condition exists ALL the time (whether you driving or in your garage), then the problem is either in the audio unit itself or in the rear window antenna (or connection to it). Left "C" pillar cover removed, you'll see the physical connections to the window antenna (it's also the rear defroster heating elements).

check the back of the radio, make sure than the antenna, connector is plug into the radio, if it is, then replace the radio.

sounds like bad connection on glass grid causing interference noise to radio.. does the rear defrost work ok ???