I agree that for football reasons. Chelsea would be better served by keeping him but there may be other non football reasons why they might want him out. There is also the question of whether a confirmed London player would want to travel up North for what would only be a short term contract.
For City, if we were only looking at the short term, he could certainly play a role for us and an option of a 2nd season, dependent on form would give us a get out.
In the longer term, I think much would depend on whether City have any hopes for Rodwell and Sinclair. Lampard would block their progress if we bought him.