The first thing the Cavaliers need to do to get better is add a primary scoring option. There really aren't any free agents left that fit this profile, so the Cavaliers will have to work a trade. If they package up Antwan Jamison, Delonte West, and a future first rounder, (lottery protected of course, maybe one of the picks Miami gave them) I can see them getting someone like Gerald Wallace of the Bobcats who averaged 19 and 10 last season, is excellent defensively, and is only 27.
In the process they could also get Nazr Mohammed who has a big expiring contact. The Cavaliers should get rid of Jamison while he still has decent value. He is already 34 years old and probably doesn't have much left in the tank.
The Cavaliers need to get someone who can be a good long-term option for the team. Someone like Wallace can step in and be that guy and Mohammed can add depth in the frontcourt as it is likely that the Cavs will lose both Shaquille O'Neal and Zydrunas Ilgauskas.
Remember this is a team that in reality doesn't have much to offer so it's going to be tough, but between Williams and Jamison I would hope they will be able to get something done.
Once the Cavaliers can acquire a solid primary option, I think they need to focus their attention on getting younger. If you take a look at the roster, they really don't have much young talent. They have surrounded LeBron with mostly veteran players. They do have the athletic guard-forward Christian Eyenga stashed overseas, but he doesn't seem to be ready for next season.
Besides that, the Cavs don't really have any young players who are regular contributors. There are plenty of young players left on the free agent market, and they do have a little bit of cap room and a mid-level exception that could be used on a good young player.
The final thing I think the Cavaliers need to do to get better is clear cap room. Clearing cap room isn't something that automatically makes the team better. In fact, it probably makes it worse, but the Cavaliers are a bad team already so it doesn't really matter. The Cavaliers need to go into an all out rebuilding stage and they can't do that with their overpaid veteran roster.
They need to gut their roster and downgrade a little bit in order to get better. A roster without Jamison, Williams, Varejao, and maybe West might not be a bad idea if they can find a team willing to give up a good young player or two, an expiring contract, and a future first round pick.
For the Cavs at this point it's all about roster flexibility. They need to have cap space. They can't have veteran players with huge contracts because they aren't going to win at this point anyway. They should start by getting rid of Jamison's $12 million and go from there.