In large skillet, cook bacon on medium heat until crisp. Reserve drippings in skillet. Remove bacon; drain on paper towels; Crumble and set aside.
Add onion to bacon drippings and saute until soft and slightly golden. Remove onion and set aside. Reserve drippings in skillet.
Mix cornmeal, flour, pepper, and salt in bowl. Dredge each piece of squash in cornmeal mixture covering both sides. Place on plate.
Heat bacon drippings and canola oil on medium-high heat. Add enough yellow squash and zucchini slices to cover bottom of pan. Cook until centers and edges are brown, about 2 to 3 minutes per side. Drain.
Repeat until all squash is fried. Place in serving bowl; toss with onion and garnish with bacon pieces.