I think that is more in line with what he will likely get however I think you need to ask yourself this question. Will bringing Sheed and another big in push this guy farther down the bench? Will he end up going multiple game stretches without seeing floor time? Is he really ever going to be more than a backup at best? If that is the case, won't he just be the next "Scal" that we are complaining about?!
If I don't think the guy has legitimate chance at being a starter someday, then I let him go. He's just not that good. I really think he has peaked. I'd sign him for 1 year at more money over a 3 year deal. Commit 4 mil for next with a team option for the second. Then if he does improve, or grow 4-5 inches in the next couple years, you negotiate a longer term deal the middle of 2011.