Is a "yellow-tag" really necessary?

Ok, let's say my TSO'd Attitude Indicator (AI) in my Cherokee goes
belly-up, and my friend just happens to have one he removed from his
machine a month ago as part of a complete panel upgrade. We both KNOW
the thing works fine and would solve my problem.

What's the ramifications of just having it installed in my Cherokee?
Is it OK without a yellow-tag? If not, why not? Isn't there any
discretion on the the part of the mechanic to install a part he has
observed as functional in one airplane and put it directly in another?

I hear if you ask an instrument shop to check it out and yellow-tag
it, they will often refuse unless you pay them to do a COMPLETE
OVERHAUL. Is that true?

What's the straight skinny on all this, guys?

Thanks...
Andre