I think 7-8 million a year is doable, but he's probably going to want 3 years. Personally (though it's obviously not my money), I'd rather pay him more than that and keep the deal at 2 years. For instance, I'd prefer 2 years 18 million to 3 years 22 million. That way he can expire when KG does. Plus, we'd still have his Bird rights if we wanted him for a third year.
I seriously see almost no reason why he won't be back. He really only has value to a contender, and no contender is going to have more than the MLE to offer. The only way I see him getting more than that is if a team like NY misses out on all the big free agents. They then might offer him a 1 year, 10 million dollar deal or something. But they won't go beyond 1 year, because they'll want to make a big run again in the summer of 2011.
Still, we probably don't want to low-ball him to the point where he leaves out of spite or that he's disgruntled next year. But I think retaining him won't be an issue.