Damon stays on a two-year deal and Matsui is gone. I think Cashman seems pretty stuck on that. I wish it were the other way around as Damon's defense is miserable to watch, but I can almost guarantee that's how it's going to go.
As for Matsui, there's no telling where he ends up. Despite all of the Seattle speculation, I think you can cross the Mariners off the list as he and Ichiro genuinely don't get along, and don't like each other very much. It seems it would make the most sense for him to sign with an American League team but I think the Mets are a serious suitor. They seem like the type of team that would take a gamble on Matsui in the field, and lets not forget that Matsui has also stated recently that he is open to moving to first base. If I recall correctly I believe I also read somewhere that he said he wouldn't mind playing for the Mets. He loves new York and he loves the big stage, so unless by some miracle the Yankees resign him, the Mets are my favorite to land him. And with the Mets luck it will be after they sign him that he breaks down and his knees give out forcing him to miss a significant chunk of the season. Better them than us.
Another option that hasn't been mentioned too much, and might be a long-shot is him returning to Japan to end his career, either with the Yomiuri Giants (who have a 3 games to 2 lead over Yu Darvish and the Nippon Ham Fighters in the Nippon Series) or a Pacific League team (Pacific League uses the DH, Central League does not. Giants are in the Central League). Either way, Matsui's seven years in pinstripes have turned out to be quite a ride, and I'm just glad that it all culminated in a Championship for Hideki-san.