Just to throw a thought out there, if they were to not retain A-Rod for next year, they would certainly save a great deal of money. Not next year, but in the next few years after that Santana, Sabathia, and Bedard are all on track to become free agents. If the 2010 Yankees, for instance, have a rotation that includes two of those three (I realize that's asking a lot), Wang, Hughes, and Chamberlain, then it would almost be worth it to let A-Rod go.
Obviously there is not guarantee that any of those guys sign with the Yankees, or that they even become free agents, but it's an interesting possibility.