While he 2008 ERA was rather high, his FIP was 3.74 and his xFIP was 3.85. In my opinion, he was better than he 2008 numbers indicated.
Since 2006, his WAR ratings have been...
4.8
5.1
4.8
6.6
In the AL East, I don't expect Vazquez to duplicate his 2009 season, but he should slide right in as an excellent number three, or even number two starter.
In my opinion, this was a fantastic deal for the Yankees. They get Vazquez for one year, at an affordable salary (when you consider what he has been worth the last four years), and with his contract, and Pettitte's contract expiring after this year, they're primed to dip into the 2010 free agent class.
It's important to keep in mind that, even if the Yankees don't make any more moves, Brett Gardner is as good, if not better than Melky. Cabrera's WAR last year was 1.4, while Gardner's was 2.1.
I don't know much about the prospect, so I really can't comment on him, but I understand he is a long way from the big leagues, with a lot of upside. He's probably the biggest casualty of the deal.