Wow ... everybody is worse off in that trade.
Houston loses it's cap flexibility for a non-All-Star that doesn't make them a contender. It locks them into the same team, a 55 win team, for Yao's remaining good years which makes it very likely that Yao never wins a title.
Washington loses it's most valuable trade asset for mere cap flexibility, which has little-to-no positive results because Arenas + Jamison + Stevenson + Blatche are still on the books. If you're going to blow up your team, do it right, don't go halfway with it. Commit to rebuilding.
New York loses a valuable rotation player (Harrington) for a non-rotation player (McGrady).