Update for after last night's draft:
If I were Morey, here's about the most realistic way I can come up with that gets Howard in a Rockets uniform based on what the Rockets have to work with:
Trade #1: Kevin Martin to Minnesota for W. Johnson and B. Miller. You waive Miller by tomorrow and save $4.25M. I think this trade works for both teams. Minnesota has a need at the 2-guard, and this trade gets them a legit starting 2-guard for basically free. Plus he goes to the best situation for him by getting re-united with Adelman, who knows how to use him. For the Rockets its a salary dump and it trims $7.3M off their 2012 books.
Trade #2: Kyle Lowry, Luis Scola, Chandler Parsons to the Lakers for Pau Gasol. Again, I think this makes sense for both teams. The Lakers upgrade themselves substantially at their 2 most glaring positions of need (PG and SF), plus get a very capable player at the 4 who can play off Bynum. For the Rockets, they finally turn their collection of assets into an all-star player, setting up trade #3:
Trade #3: Pau Gasol, Patrick Patterson, Jeremy Lamb, Marcus Morris, Terence Jones, Shaun Livingston (for salary matching, ORL would dump him), Greg Smith, 2013 and '15 1st-Round Picks to Orlando for Dwight Howard and Hedo Turkoglu.
If the Magic deduce that Howard isn't re-signing, then they'll probably look for the best collection of players, picks, and cap space while also trying to dump Hedo's contract at the same time.
This trade would give them a legitimate top-5 C in Gasol to replace Howard. They would also be able to transform themselves and become much more younger and athletic overall, which would help overcome the defensive drop-off you get from losing Howard. They would be able to waive Reddick and dump Hedo as part of this trade, saving $7.8M in salary for the upcoming year.
If these moves were pulled off, and if the Rockets brought Donatas over from Europe and re-signed Lee, Dragic, and Camby, it would look something like this for next year:
PG: Dragic, Fortson
SG: Lee, W. Johnson
SF: Turkoglu, D. Simpson
PF: D. Montejunas, Leuer, Royce White
C: Howard, Camby
Obviously the Rockets would be lacking in depth, but they would have their franchise main piece, which is the hard part. The rockets would have the MLE and bi-annual exception to fill in the fringes.
And what if Howard leaves after a year? Then the Rockets would dump Hedo (saving $6M) and conservatively have at least $20M in cap space to go after a max FA in 2013. Or if there are no worthy max FA's, they tank the 2013-2014 season, probably end up with a top-5 draft pick for 2014, plus again $20M+ cap space for summer 2014 to rebuild the team (Lebron and Bosh can opt out and be FA's in 2014. I'm not saying anything will happen, I'm just saying). Or a 3rd option is if they know he's leaving, they can pre-emptively unload him for assets at the trade deadline this year.
Either way it's better to unload everything we have right now for Howard rather than being stuck in purgatory and winning the award for tallest midget every year like they are now.