I think Dillon will stick around at least a couple of more years, if healthy. I don't think he's done, as some have suggested (not necessarily in this thread). I don't think you can go from running for 1,600 yards and running over people, as Corey did in '04, to being washed-up. He was hurt last year and never played at full strength. Just comparing to how tentative he looked last year makes me think he tried to gut it out and because our running game wasn't strong last year. Plus, having your two best linemen out and two rookies filling in didn't help matters.
He should be held back a bit this training camp, a la Branch, because of his age and injury concerns. He's got nothing to prove by being banged around too much in practice and exhibitions. What's he, 32 years old? He still looks in good shape and remember a couple of years ago when Curtis Martin had an off year due to unjuries and the majority thought he was all done. Then he came back and did his thing. I see something similar with Corey this year.
Regarding the extra cap space, the Pats must sign their young. They have to, even if it means paying Seymour more than they want.