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The problem I've come to realize is that there really won't be a great TE to be had this year. The draft isn't very deep at the TE position and it's not likely we'd get an immediate impact guy from there anyway.
The one name getting thrown around as the "top" FA tight end on the market is Dallas Clark from Indy. Most implications are that Indy won't let him leave, but he will be an unrestricted free agent in a weak FA TE class. I have no interest in Dallas Clark. His numbers over the past few years aren't all that more impressive than LJs. Before this year he caught around 30 balls a year for 4 or 5 TDs. In the last 2 years LJ was catching 50-60 balls for the same amount of TDs. This year Clark had a career year and caught 58 balls for 11 TDs, but how much of that is thanks to Peyton Manning? More than just a little I'd expect. Clark also lead the NFL in drops this year, certainly not something we need more of... I don't think Clark is a bad player, I just have a sneaking suspicion that LJ Smith would be just as productive in the Colts offense if not moreso. Clark has also been dogged with the same doubts about his blocking as LJ has in his career(although I think both have improved). Therefore, there's no need to drop boatloads of money on Clark to lure him out of Indy.
The other options at TE in free agency are far less appealing... After Clark and LJ there's a noticeable dropoff in talent. The best of the rest would appear to current Saints TE and former 49er Eric Johnson. Johnson had one good year in 2004 and even in that year he only caught 2 TDs. Otherwise he's a guy that catches 30-40 balls a year averaging a dismal 3.4 per catch. I'd sooner take my chances with Brent Celek & Matt Schoebel.
The rest of the list is barely worth mentioning...
Stephen Alexander - Denver Broncos
Bryan Fletcher - Indianapolis Colts
John Gilmore - Chicago Bears
Marcus Pollard - Seattle Seahawks
Ben Troupe - Tennessee Titans
Jermaine Wiggins - Jacksonville Jaguars
Kris Wilson - Kansas City Chiefs
Jermaine Wiggins has had a couple good seasons in Jacksonville Minnesota the past couple years but has never shown himself to be any kind of red zone threat.[editor's note, by BleedGreen] My Jaguars blogging pal Chris from Big Cat Country let me know that Wiggins was cut before the season after having a bunch of nagging injury problems and never actually played with the Jags. So he's been out of football for a year. Even better! Further proof of how bad the FA TE class is...
In the draft, there only appears to be one TE with anything close to a first round grade and that's the big(6'6) Notre Dame TE John Carlson. Even he will probably be lucky to get picked in the first round. There's USC's Fred Davis, Bennett Martellus from Texas A&M & Martin Rucker from Missouri all who have interesting upsides but are 2nd/3rd round kind of guys. Martellus is the most gifted athlete out of the bunch with the biggest upside but he's coming out early and is very raw. Some team could reach for him in the first and he could be a big boom/bust pick. If we did use a high pick on a TE, I'd sooner roll the dice with him than the others.
It seems obvious to me that the best course of action would be to keep LJ Smith even it if means a one year franchise tag. The only position with a cheaper franchise tag than tight ends are kickers, so for around 4 and half million I think it would be worth keeping LJ around for 2008.
Next up will be options at wide receiver.