The first thing is, part of the foundation of my trade is my dismissal of 2009 cap-space as valuable. I know most don't agree so the trade will most likely be hated...but give it a chance...

Assumptions: portland will end up with the 12th or 13th pick and Memphis will end up with the 5th or 6th pick. It's also assumed that the public statements by the Memphis GM are realtively accurate. Those are that he wants to reduce payroll, stockpile draft picks, and get young players on cheap contracts.
A further assumption is that KP has identified a player he really wants that he knows won't be available at 12 or 13
The trade:
Raef Lafrentz, Steve Blake, Martell Webster, Josh McRoberts, rights to kaponen, 12th pick, 2010 1st round pick and 3 million
for: Mike Miller, Brian Cardinal, Kyle Lowry, Marcus Vinicius (sign & trade filler) and the 5th or 6th pick.
http://games.espn.go.com/nba/features/traderesult?players=130~3012~558~3036~1994~454~3220~2795&teams=22~22~22~22~29~29~29~29&te=&cash=
Why for Memphis: Well, they get 16.6 million in expiring contracts and in the summer, that would be the best they could do unless they simply traded away Miller to Philly for nothing. It would get them massively under the salary cap in 2009. They get a future draft pick. And they get a couple of young players in Webster and McRoberts along with the rights to Kaponen.
It does add about a shade over 4 million in additional salary for 08/09 (more on that in 'why for portland'), but the 3 million from Uncle Paul helps offset that. Then the difference in salary scale between the 5th pick and the 12th pick would take car of the rest.
If memphis needed a little extra inducement, Portland could send back their 2008 2nd round pick + 3 million for a future 2nd round pick.
Why for Portland: first off, it's obviously cold-blooded for KP to send out blake a year after he signs him. But Blake's contract structure had to indicate that he could be short term in portland. Besides, I think 'cold-blooded' is on a GM's job description.
Portland is essentially trading Webster for Miller. Miller is older, but then he has proven to be a consistently good shooter over time...something Martell has yet to prove, at least the consistent part. Miller is easily a better ball-handler then Martell and is a significantly better rebounder as well. Miller has played a lot at SG, something martell hasn't demonstrated he's capable of yet. Miller has a bigger contract, but then martell's will be up for extension this summer, and he will want a lot more money then he's currently making, even though he hasn't earned it.
Portland exchanges Blake for Lowry. That's a downgrade as far as shooting and a steady hand goes (although Blake's hot shooting has cooled considerably and his career numbers imply he's not nearly as good as he was during the streak) But lowry is very quick and is a good defender. He's really young as well and may be an excellent backup PG.
Taking on Cardinal's contract sucks, but it would mean that in the summer of 2010 and till the 2011 trade deadline, Portland would have the expiring contracts of both Miles and Cardinal. That might lead to some excellent leverage in a trade. Vinicius would simply be waived.
Giving up a future draft pick is not a great loss in my view considering what portland's future record should be.
And finally, there is another component to this trade. It would give Portland a 4 million dollar trade exception. Portland may very well be able to package the trade exception with jack and/or frye and pick up a good player and perhaps a pick. KP could even aim his sights higher and add Outlaw to the secondary trade with the TPE and jack for instance. That would dangle 8 million in salary relief, and a couple of decent players. This could be some significant leverage.