What are the connotations of not entering into a covenant "with them and with their gods"?
Ramban #1: It is a prohibition against leaving any Kena'ani alive and any of his idols intact.
Ramban #2: It means not entering into a covenant with them to keep them alive - as long as they adhere to their gods, but not once they relinquish them.
How does the phrase "Ki YIh'yeh l'cha le'Mokesh" fit into the Pasuk?
Rashi: It follows the previous phrase - ' ... when you worship their gods which will be a trap for (ensnare) you'.
Ramban and Seforno: The Pasuk reads 'They shall not dwell in your land, because they will be for a trap, lest they cause you to sin, when you worship their gods'.
Targum Onkelos and Targum Yonasan: '... because you will worship their gods, because they will be a trap for you'.