I bought some soft fluffy yarn on clearance.
It was originally wrapped in some sort of donut shape. There wasn't any middle to pull from.

It keeps getting really tangled! Is there any tips for using fluffy-wuffy yarn to keep it from becoming a useless tangled mass?

Don't know what kind of fiber you're using, but putting mohair in the freezer (until the little hairs stiffen) is supposed to help with tangles. Maybe it'll work with your yarn too. :shrug:

If there was no middle to pull from like a skein it may need to be wound into a ball. You can either use a ballwinder if you have one OR use Amy's method (http://www.knittinghelp.com/knitting/basic_techniques/misc.php)which works very well!