You are right that a lot of things can still happen to lower Bay's FMV. If the Yankees acquire Holliday, they will not need Bay. If the Yankees win the WS, they will not have a lot of pressure to poach our guy. On the other hand if the Yankees get edged out by Toronto or Tampa, they will drive a tractor trailer full of money to Bay's house. Bay could get a little dinged up and finish hitting .265. There's not a lot of .265 hitters making more than $10 million/year. He does have to consider taking guaranteed money now as opposed to waiting, but that would not be a home town discount. That would just be an exercise of business judgment.
If the Yankees decide to blow away the market for Bay, I'd be fine with signing Damon to play LF for a couble of years. He still is a good offensive producer, but not with the power of Bay. You wouldn't lose anything in the field. Bay's arm is better, but he is not carrying a gun either. Damon might go for as little as $5- 6 million/year. The $ saved could be spent upgrading another position. Bay is a very very nice player, but he is no cornerstone superstar.