Joe Torre will remain the Yankees manager.
I've noted how I think this is a mistake at this point. Here is what could be good:
(1) Free agents. Torre is a draw for potential free agents. In the late '80s and early '90s, top free agents avoided the Yanks like plague (two words: Greg Maddux). During the Torre Era, the Yanks have obtained (and retained) top free agents and had players with no-trade clauses approve trades to the Yanks (Clemens, Johnson, Moooooooooose, Damon, Giambi, Sheff) in no small part because they wanted to play for Joe. That's both a blessing and a curse because as Torre's aura grew in the late 90s, players wanted to come to the Yanks, and the Yanks became less self-reliant and instead used low payroll teams as a virtual farm system. Hopefully that latter aspect will change.
(2) Bench coach. Torre will almost certainly NOT be the manager in 2008. Retaining him through next season, however, allows the Yankees to essentially designate their manager in training. They can try to lure Joe Girardi or groom Don Mattingly. Keeping Torre means the Piniella option is off the table because Looooooooooooo will be managing somewhere next year. Best case scenario for the Yanks would be if Loooooooooo takes over the Cubs and the Yanks can lure Girardi to the dugout for another stint as bench coach before he takes a step up the ladder.
(3) Consistency. The Yanks will again be the favorites in the AL East and will have extra incentive to play their collective arses off because they all know it will be Joe's last go.
That said, there are the unexpressed negatives:
(a) Overreliance on veterans -- this means Matsui will stay and ARod likely will too. It also means that Cabrera may lose opportunities when the Yanks should be making him a cornerstone of the future.
(b) Pitching issues -- how badly will Joe abuse the 'pen next year? Sky's the limit on this one. More importantly, however, what will the effect be on Philip Hughes, the top pitching prospect in ALL of baseball, according to Scouts, Inc.? I've noted before how the Yanks have squandered and failed to develop pitching talent (Contreras, Weaver, Lilly, Vazquez). The only young pitcher who has "progressed" under Torre's watch after initially playing with the big team under Joe is Wang (remember -- Pettitte was an in-season call-up in 1995 or year 1 B.T.). And the primary reason for that is that last year Cashman basically ordered Torre to roll the kid out there every five days. Hughes may be ready to join the Yanks after about a month at AAA next year, and Cashman may need to spell out the need to use the kid regardless of any coach or manager's feelings otherwise.