With Palmeiro officially cutting ties to the Rangers, it looks as though he could end up in the Bronx. With Nick Johnson gone, the Yankees need a DH/1st baseman. Palmeiro's sweet swinging power stroke from the left side is tailormade for Yankee stadium. Also, with Giambi's creaky knees, you will need someone to play significant time at 1B. At present, the Yankees don't have any other 1st baseman on their roster other than Giambi. They sure as heck wouldn't have to worry about any severe offensive dropoff at 1B if Giambi goes out with an injury for a prolonged period of time.
With J.T. Snow re-signing with the Giants, there goes the only other viable option in my opinion. The Yanks did resign Ruben Sierra, who can still swing the lumber, but he will probably strictly come off the bench.
Their lineup next year could look like this:
They can basically go righty/lefty right down the entire lineup. If/when the Red Sox get A-Rod, it will surely be Clash of the Titans in the AL East.