Phil Hughes was the consensus #1 pitching prospect in the game this time last year (excluding Matsuzaka, who shouldn't have been considered a prospect, but I digress). Other than pulling a hamstring, he's done nothing that should change our opinion on him.
Concerns: Hughes appeared to change his arm angle this year. It caused him to lose 1-3 mph on his fastball. That turns him from a guy throwing 95 to a guy throwing 92. That's a huge difference. 95 mph is a plus fastball. 92 is an average fastball. Hughes has the control to do well regardless, but without that velocity, he turns from an ace to a #2 to #3 starter.
Signs of Hope: After recovering from the hamstring injury, his stats in September and October were excellent: 3-0, 2.73 ERA, 29.2 IP, 1.18 WHIP, 18 Ks. He has the makings of an ace, and could be one as early as this year. Don't forget that he was on his way to his own no-hitter prior to pulling his hamstring.
Don't trade him: Cashman wouldn't part with Hughes prior to this season. Just because Joba Chamberlain had a great debut last season that doesn't mean that they should suddenly trade Hughes. Yes, it's a blow if the Red Sox wind up with Santana. That said, if they end up acquiring Santana, their total team salary will become very close to that of the Yankees, somewhere in the $160 million range.