That's a tough call, and a tough spot to be in as commish.
I'm assuming that a special case like this isn't covered by your league's constitution or rules...
You have to deal with several different issues here. The first is whether a trade of this sort, involving a player not yet claimed by either team, should be allowed. I'm not opposed to trades such as this or other unusual configurations, but that's just a matter of taste; some players disagree. At any rate, if this question isn't covered in your rules, then you can discuss what types of trades you want to allow in the future, but you shouldn't penalize the teams making the Prior deal for coming up with something new.
(Incidentally, I don't see any way to make a trade such as this illegal, since it's indistinguishable from one team picking up a player off waivers on their own, and then making a trade)
Anyway, the bottom line is that I see no problem with the move. That's not the only issue here, though. If one team didn't have all the information, I think you should pull the brakes, especially when playing with friends.
If the team trading Prior didn't know, for example, about Alou's hip or shoulder trouble, or wasn't aware of Pena being sent down (depending on when the trade was made, of course), the trade should be overruled, and all the information that was known at the time of the trade should be presented to both sides. I wouldn't include opinions about the quality of the players involved here, but only such things as injury status or Pena being sent down. If, after examining this information, both sides still want to make the deal to help their respective teams, they should be able to, and this deal should not be able to be overturned. If not, then there is no trade, and the two sides can renegotiate ór not, as they wish.
(By the way, even if the trade winds up not happening, I think the team that picked up Prior should be allowed to keep him, even if they didn't know who he was.)
The most important thing, though, is that your league reaches a consensus on how to handle this. I think this way would be fair to everyone, and hopefully keep this from being a divisive issue. Let me know what you think, and what you decide to do. Good luck.
In my own primary league, by the way, we ask teams trading for injured players (for example) to briefly post that they're aware of the injury concerned; that eliminates a lot of trouble, and we haven't had a single protest since the league was founded.
Any other thoughts on this tricky issue?