There's an argument being put forth by Pacer fans and columnists that instead of dealing JO, Bird/Walsh could just let JO opt out in 2008 and get $15 million under the cap. Based on everything I've read, this is misleading if not entirely false.
While it's true the Pacers would have only $40.5 million devoted to guaranteed salaries, there's a lot missing. That $40.5 mil is spread out among 6 players: Murphy, Dunleavy, Daniels, Tinsley, Diener, and Foster (if he exercises his option). Harrison may or may not get a qualifying offer. But three of their future core players, Diogu, Granger, and Shawne Williams have options that have to be picked up by 10/1/08. All three will likely be picked up during the season. Include those options, and the Pacers will be at $47.3 million, roughly $8 million under the cap.
Unfortunately for the Pacers, the cap exceptions also count against their individual cap in the 2008 offseason even though they're well under. The mid-level and bi-annual exceptions combined are worth an estimated $7.5 million, NTM any traded player exceptions they may have (I'm assuming none for now). All of that brings the Pacers to $54.8 million, and I haven't accounted for rookie salaries yet. The Pacers could renounce the exceptions, but why? There's no franchise FA at $8 million. They'd still have to deal with the fact that beyond JO there's no franchise player on the team - maybe Granger, but that'll take time. No teams are interested in either Murphy or Dunleavy at their relative prices. And Jeff Foster may want an extension, or he could opt out and try for a sign-and-trade.
In short, the Pacers are screwed with or without JO. Keep him and they're stuck between a rebuilding phase and a contending run which gets them 4th in their division at best and out of the playoffs. Trade him and they don't get full value plus they have to wait until the 2009-10 season for most of their bad K's to become tradeable. The former is foolish. The latter is an honest approach to the future.