Last I read on K-mart, he doesn't have a contract because he still won't play for the vet minimum. The Knicks are also waiting on Camby and Sheed, but I think that's a mistake. It's time to look for a young big who can serve as the fourth big behind Melo, Amare and Chandler. Ideally the guy is big and can rebound.
Spare parts or money for Jermaine O'Neal makes a lot of sense, even if he is yet another aging big. The team would be a lot better if you had any one of a healthy Camby, O'Neal or Wallace going into the playoffs. That said, I'm not dealing Shumpert just to get O'Neal back because I don't like the other players the Suns have.
The way I look at the guard landscape, getting Shumpert back to form is the best way to improve the perimeter defense right now. There just isn't a lot out there right now. If the return on Shumpert is Paul Milsap, then that's a deal you have to make. Money-wise you'd be looking at Shumpert/Novak/Thomas for Milsap, but that's still a good trade for the Knicks.