Andy Pettitte will pitch for the Yanks in 2008. This gives them a rotation of Wang, Pettitte, Hughes, Mooooooooose, Joba/Kennedy. That's enough to get to the playoffs and do damage, especially if the kids don't regress.
Here's what Andy Pettitte did in his second season (1996) with the Yanks: 21-8, 3.87, 221 IP, 2nd in CYA voting. Hughes is supposed to be a top of the rotation starter with greater upside. If he puts out a performance somewhere between the '96 Pettitte and what Pettitte did in his first year with the Yanks (12-9, 4.17, but 6-1, 3.00 during the Yanks' push to the wild card from Aug. 30-Sept. 29), that's more than good.
So pull off the Santana trade. If the Yanks want more depth in the rotation, get Bedard or Haren or even Blanton. But don't trade Phil Franchise for a flyball pitcher who will have one of the weakest outfield defenses in Yankees' history behind him.