If you sign Grant Hill, Pruitt is gone, absolutely. House would technically be the backup PG, but Hill would likely handle most of those duties from the SF spot.
Now, if Hill goes back to Phoenix or to NY, it gets a little trickier because you aren't going into the season with ONLY Rondo and House as the point guards, not with House's limitations. If you're confident you can pick someone else up for the minimum that'll be an improvement on Pruitt, you probably let him go anyway.
I think Pruitt's got a decent shot at getting a job somewhere else; in some ways, it would be better for him to get cut now rather than in camp. He could be a fringe-rotation guy on a mediocre team, maybe some place like Sacramento, they need help at the point. I just don't see him as having enough upside (is he any better today than when they drafted him? No much....) to justify keeping around for another year.