I think Roy is probably right, but he's a well known Jeff Foster fan. He even wears his hair like him.

1. I wouldn't trade for Foster while he's dealing with recurring back injuries. After seeing him playing out there a few weeks showing fitness, then I'd consider him - he brings rebounding (much needed!) and defensive versatility.
I agree with this only to the point that he's such a drastic defensive upgrade over anyone else involved in the trade that I think it's worth the risk, but that's ajudgement call, and your point about Foster's injury is very valid.
2. The Pacers may need to trade away salary this season in order to avoid paying the luxury tax next season. Obviously they'd rather trade TJ Ford or Murphy, not Foster. Or the luxury tax threshold may be higher than expected and all they have to dump is one million dollars or something like that.
See, Foster has a deal guaranteed to 6 million next year as well. Ford, Murphy, they're the better players, and Indiana is rebuilding. I think moving Foster makes more sense, not less.
3. If they really need to shed salary and don't have a better option, they may do that trade. But I think Foster would be the 4th big and keeping Davis wouldn't make much sense, so I'd construct a trade around Davis.
I don't see Foster eliminating Davis, but supplementing him. Foster brings better rebounding and more versatile defense than Davis can, and Davis brings his sometimes solid midrange jumper and scrappier savvier offense. They're really different players, and don't duplicate a lot of each others talents.