I don't think the organization is looking for a top-4 Dman. Their interest in an outside Dman is, in my opinion, top-pairing or bust. They have a ton of guys they feel either are, or soon will be, ready to step into the NHL lineup. There's no point in blocking the progression of those younger players with anything short of a top-pairing guy.
Ballard has actually spent the past two seasons changing his game to be a Defensive Dman.
He's physical, uses his speed and skating to back off fore checkers and has been very useful in the depth role he took on here in Vancouver.
Personally I wouldn't straight up dump him and would at least ask for a place holder Dman and a mid pick.
I like Engelland because of his nastiness and size.
But if the Pens are looking more of a crease clearer like Z was, than Doug Murray like suggested above me is probably a better solution.