I wouldn't worry about his contract affecting our flexbility. Yes, he would eat into the potential cap space, however, with guys like Howard and Paul most likely going elsewhere, that is less crucial. And while Varajao eats into cap space, he is still relatively young, and he is very fairly paid for the production he gives you at a premium position, and you would likely have to pay a lot more for comparable production on the open market.
The problem is, Cleveland knows this too. They have very little reason to trade him unless they are getting a lot back in return. They already have a ton of cap space next summer, and they won't convince anyone as good as Andy to come to Cleveland for less than the $8m he is owed next season.
While I would love him, I just don't see why Cleveland would trade him unless we blow them out of the water with an offer.