Peavy has been a great pitcher - in the National League. Peavy has been a great pitcher in the NL WEST. Off the top of my head the only other pitcher I can remember coming from the NL west to the AL was Chan Ho Park. Park's last 2 year with the Dodgers - 3.27 and 3.50; Park's first 2 years with the Rangers - 5.75 and 7.58.
Don't get me wrong - Peavy is substantially better than Park; but there is no doubt that switching from the NL west to the AL east will increase his ERA - the question is by how much. I believe it is a change worthy of a full point in ERA. This makes Peavy around a 4.00 era pitchers for the Yanks. I don't know about you, but I think Hughes will put up numbers better than a 4.00 era!
With more proven options available without having to give up any prospects, we as Yankee fans can completely ignore all of those Peavy to Yanks rumors and concentrate on the things that actually have chance of happening.