I was served with foreclosure papers by bank, and they are asking me to submit rent directly to them. My lease is up at the end of Aug 2011. My rent is due this week for July and I was thinking of just withholding the July rent and moving out by months end so as to recoup my deposit and pay for new rental deposit. Are there any possible legal ramifications with doing this...

Yes, you don't get to choose how the deposit is used. If you don't pay July, then can serve you a 3 day pay or quit notice and have you evicted probably before the end of July. With an eviction on your record it will be harder to rent somewhere else.

I would talk to the bank and see if they will allow you to vacate early.

Agree if you don't pay, they could easily evict you within a shorter period

Recoup the deposit - you mean now rather than later? The bank does have to give it back even if it went to the owner.

Sometimes you can use foreclosure to your advantage by negotiating a month to month lower rent while it's for sale, promising to move when they want you to.
There are federal protections for people who don't want to move, and Florida isn't exactly selling like hotcakes.