From what I've heard, Denver was the main reason this didn't go through. If that's true, their front office is moronic. They will never get better talent than what New Jersey was offering.
In the original deal the Nuggets would've been taking on more salary. That didn't make sense to Denver because they felt they would've been paying more $$$ (approximately $4.5m in salary and another $4.5m in luxury tax) while not getting any better in the Wins column. They've already got an $83m payroll right now.
So each team is back to the drawing board trying to get other teams involved. It looks like the principles for NJ/DEN are Harris, Favors, Quinton Ross and picks from NJ for Carmelo. That trade would work and save the Nuggs about $6m from salary and luxury tax, but the problem with this 2 team trade is that Denver doesn't need/want Harris, so they're trying to find a 3rd team to take him. They've got one in CHA, who would be willing to off Diaw for him. But then Denver would be getting Diaw back and he has 2 years at $9m per year, which I don't think Denver is interested in. CHA could also offer Mohammed and either DJ Augustin or Gerald Henderson, but they don't want to create an even larger hole at their Center position while also adding on future salary (Mohammed is an expiring).
My guess is that the deal expands to Harris, Favors, Ross, T-Will, Humphries and picks for Melo and JR Smith. That would give DEN a savings of about $8.8m with salary and luxury tax, while providing a couple more assets in T-Will and Humphries to offset Harris or whoever they trade him for. They could also look to move those two to a team under the cap (or with a big enough TPE) for a pick, gaining additional $$$ savings and getting another pick.
I just have this feeling in the back of my head.....the Knicks somehow end up getting Melo and we're gonna be in on the deal just because of the stockpile of draft picks we have now
I think it's the opposite if we're involved in helping NY land Carmelo. Maybe we wouldn't be giving #1's, but instead receiving them. Right now the Knicks are still able to trade their 2014 and 2016 #1 picks. If Denver got those along with a mid-sized expiring like Azubuike in a trade for Melo, we could look to take on his salary with those picks, which would save DEN about $6.6m