I saw this quote in the league messages from the previous owner:
i have cut at least 15 of
my best players....my team got
stacked when there weren't
many teams in this league...
....this team will still have a
decent core and good draft
picks for the next owner...
It looks like the intention was for league parity, and he probably didn't realize the consequences of the dead cap.
In terms of rebuilding the team, I'd sell the elite veterans ASAP, even if it's slightly below market value. Get picks for two years and beyond, but not for this year (since you won't have cap space). This gives you the capital to rebuild with and should help you gain enough cap space for this year's rookies.
Either way if you do this or restructure deals, be aware that you'll be left with dead cap for the following year when you have to pay the remaining bonuses.