I've said in other threads that I don't think this is true, and even if we were to sell him it would probably be for more than that, which Birmingham wouldn't pay. I think the move would show a real lack of ambition for Fryatt though, since Brum already have DJ Campbell, Cameron Jerome and Mikael Forssell, and it's looking likely that they'll get Collins John (an absolute great signing I think). Forsell might leave, but even then I think Fryatt would be 4th choice striker, and I think he is a player who will want more than that.
My only worry is though that Steve Bruce has said he has bids in for 2 players. Collins John is all but confirmed as one of them, but there hasn't been much talk of who the other is, other than these rumours we're now seeing from crap sources of it being Matty Fryatt. Unreliable rumours are still worrying when there are no other rumours at all it seems..