Tinsley, while not on good graces, has really done nothing to warrant such a drastic move. Nor is he (theoretically) medically unfit to play. If he was medically unable to play, I imagine they could find away to keep him away from the team...but not for three years.
And I imagine that come November, Steph will either be back in a Knicks uniform, traded to another team or bought out.
Like I said, you can't keep someone hostage for three years. Six months, sure. Maybe a year under extenuating attitude/medical circumstances. But not three years.
Additionally, from Herb's standpoint, there is no financial reason to do that. It makes more sense to just buy him out and hope to save $5 million. So even if they really, really wanted to stick it to Jamaal and hold him out from playing anywhere else for three years over spite...there's just no reason to go to war with the Player's Union over something that doesn't help you financially and is a huge distraction/blackmark to your franchise.
Jamaal's representatives know this and the Pacers FO know that they know this so it's a non-option.