I agree, Who. Varejao can work as a second big man and would be great as an energy guy off the bench too (if you can get a burly Perk-type as starting center). That's the major reason I think the ideal for Cleveland would be a trade this summer - so they can lock up Varejao longterm without worrying about the signing taking away their chance at cap space to bring in a star next summer. A future core of Lebron-Bosh-Mo-Varejao would be a fantastic start to a good 5-6 year run, plus they'll have the MLE this summer and next. If they want to keep the cap space to get Bosh, they can't resign Varejao or use the MLE (other than on a one-year deal) this summer, and I believe that if they have cap space next summer, even if they use it up in getting Bosh, they don't get the exceptions.
If, for example, Cleveland could get Toronto to agree to a Wallace, Pavlovic, West or Gibson, Hickson, future picks and cash for Bosh and Banks (or some other contract the Raptors want to unload, I don't have the numbers in front of me), they can lock up Varejao and use the MLE to sign a bigger backup wing or a big man. This season, they could put out Mo-MLE signing-Lebron-Bosh-Ilgauskas with Gibson and Varejao as their top 7. They could use the LLE and minimum contracts to fill the bench. Or, maybe they sign Gortat at the MLE, and he becomes the starter. They would then have Ilgauskas' expiring contract and can maybe try to pry Carter from New Jersey or McGrady from Houston (not sure if Cleveland would have the matching contracts available but Houston might be willing to take Ilgauskas and Gibson for McGrady).
In the end, I don't think they have the non-expiring contract assets to get a deal done with Toronto, and that's the key to this working. Otherwise, I really don't know how they keep Varejao (an important player on their team) and get a true second star.
I agree about dumping Gibson, but I don't think anybody would want him with the long-term, too-expensive deal he's signed to.