From the Post:

With a need for space on the 40-man roster, the Yankees are about to approach "American Idle" Carl Pavano. Their plan is to release him then invite him to spring training on a minor-league deal. Pavano had Tommy John surgery last summer. The minor-league offer may have something to do with collecting insurance money on Pavano's four-year, $40 million contract that expires after the 2008 season.

Why not release him before the Rule V draft? I don't think there's a danger of him being claimed... there must be some reason they aren't or can't.