MLBTR did a nice write-up on why L.M. might be a more intriguing options for teams rather than the free agents in the 30+ age range. Im not sure Id trust L.M. to be our everyday LF'er, nor our leadoff man, but for a small $ value contract, he has a lot more upside than the other options (Damon, Podsednik, Andruw Jones, etc.). While the aforementioned names have more proven history, they are certainly in their decline, and would also likely demand a more expensive contract. I would say L.M's defense is about on par with Podsednik, aka a notch about Gomes'. Hitting .289 against lefties, he could provide some pop in the lineup.
*EDIT* I just saw this quote: "Any team that signs Milledge will not only have him for the 2011 season, but also for the next two as an arbitration-eligible player as well." Certainly could be worthwhile if we'd have him under control for 3 years.
I say offer him a major league contract on a 1-year, $800k contract with a $1mil option for year 2. If it works out, we have a great bargain, and if it doesn't, we're hardly out anything. That contract offers a significant raise from his '10 salary @ $452k, so he might be inclined to take the deal. GABP certainly would help his game as well with a smaller outfield which lends well to helping his defensive and offensive numbers.