Yeah, I agree.
As much as I like that Augustin/Baby swap for our future (when you think about it, it would be huge because we would have a good to great backup PG secured for the next three years at a cheap price - rookie contract -), I don't understand why Danny would trade a big for a guard, especially since, for the short term, we will be fine with Marquis handling the PG duties with the 2nd unit.
Baby has been disappointing this season but we've seen in the last couple of games that he is starting to get back into his shape of last season, starting to hit his shot again, and he rebounds very well, especially with the offensive boards.
Sure, he will always be "small" and get blocked often but he brings a lot of energy and boards, while being a capable offensive threat. We need young legs in the froncourt.
That's why I'm against this trade, but I think it only makes sense to do it if Danny knows he will get a froncourt addition soon. I'm guessing the most likely scenario, according to the rumors we've heard over the past few months, would be that he knows he can trade Ray to Sacramento to get Martin and Nocioni. Thus he would have Martin taking Ray's spot in the starting 5 and Nociono playing at power forward off the bench.
With that said... if Danny trades Davis for Augustin, I really hope he has something planned behind that move, to improve our froncourt depth. I know you can argue that in the playoffs Davis wouldn't see much playing time anyway, but the same can be said for Augustin, and big men are always more useful in the playoffs because of foul trouble or possible injuries, not to mention matchups.
On the other hand, does it make sense to trade Davis for a PG, while expecting to sign/trade a big man just after? Wouldn't it make more sense to acquire the big man first and then trade Davis? Because if your second move suddenly doesn't work, you're screwed in the froncourt.

It seems obvious than having a good froncourt rotation like KG-Perk/Sheed-Baby + potentially Shelden will be more useful in the playoffs against Shaq-Hickson/Varejao-Ilgauskas, Howard-Lewis/Gortat-Bass than a Rondo/Augustin backcourt against the other backcourts.