Update: SI.com’s Jon Heyman is reporting that the deal is done and it involves the Phillies, Blue Jays and Mariners. Heyman is awaiting confirmation that Cliff Lee is the player being traded to Seattle, but that is the most likely scenario.

CSNPhilly.com‘s Jim Salisbury is reporting that the Phillies are in negotiations with Roy Halladay over a possible contract extension. Andy Martino of the Philadelphia Inquirer is reporting that Halladay and his agent have checked into an area hotel room.

A source also told Salisbury that Halladay is expected to undergo a physical exam with the Phillies medical staff later this week.

I’ll give you a moment to catch your breathe and compose yourself…..

OK, glad to have you back.

It is unclear, according to Salisbury, who the Phillies would trade away IF this deal were to actually happen, but there has been rampant speculation all day that one of those players could be Cliff Lee.

In an article written Monday on Foxsports.com, Ken Rosenthal wrote that while he had no proof that a deal was in the works involving the two former Cy Young award winners, “but I’ve got a hunch.”

Rosenthal went on to explain that the Phillies are unlikely to be able to re-sign Lee after this season, regardless of whether they acquire Halladay, because all indications point to Lee wanting to test the free agency market in search of a contract in the neighborhood of $C.C. million.

So why not trade Lee, keep Joe Blanton and a top prospect or two, and let some other team partially deplete their farm system in order to acquire Halladay, who the Phillies really wanted more in the first place?

Seems like a fair deal.

In my opinion, if the Phillies can land Halladay for J.A. Happ and Domonic Brown, or even those two plus Blanton, then do it. To have a rotation of Halladay, Lee and Cole Hamels could be historic.

That being said, I’d rather have Halladay on a multi year deal then neither of them after 2011.

Stay tuned. This is a story that updates ever few minutes.