There's a difference between healthy enough to practice and healthy enough to remain effective against NFL defenders. Paul Klee of the Colorado Springs Gazette has it "on good authority" that McGahee's questionable health was the "No. 1 reason" for his release. Per Klee, it's also why McGahee's reps were severely limited in the two practices before he was cut.
The Gazette might not be in the habit of scooping The Denver Post, but this is a strong report. If the Broncos don't believe McGahee's knee is right, it's going to leave any potential suitors second-guessing the merits of adding a 32-year-old tailback.