According to Jon Heyman, of SI, the Red Sox are now not willing to offer either Casey Kelly or Clay Buchholz for Roy Halladay. This would effectively take them out of the Halladay sweepstakes, especially if the Yankees are willing to give up Jesus Montero, their slugging "catcher" prospect. As I argued before, I think it is more valuable to hang on to the young players, but this is a pretty stunning drop in value from July of last year.
Baseball Prospectus has an interesting take on the Halladay situation, and game theory in general, from the Blue Jays perspective. Essentially, Halladay is worthless to the Blue Jays - they're not going anywhere in 2010 and his salary outpaces the revenues he brings in. Given that he's worthless, the Jays ought to take the best offer they can get for him, no matter what it is, and even if it seems "unfair", they're still in a better position than they were keeping him. Of course, our brains just don't work that way. I've said it before and I'm sure I'll say it at least once more, when an underwhelming package of prospects nets Halladay - Ricciardi really hurt the organization by not making a deal last July.