I don't know why Detroit would give him a short term deal.
Let's say he goes into Holland's office and says "I'll come back on a 2 year, 8 M total deal" they may simply say "You have our final offer" and walk away.
Think about it. They lose Blashill now and likely will lose Babcock when the 2 years is up. Is that enough time to groom an assistant/AHL coach?
We don't know what Bab's true motivations are. What I have inferred from what has been said is that he feels there is a transition period fast approaching for the Wings. Datsyuk, Zetterberg, and Kronwall are all over 34. They have a decent youth movement coming, but really lack the franchise building blocks ("we've won a little too much", his words).
Think about where Holland has taken him. To Grand Rapids to see the kids on the farm and to the World Championships to see Dylan Larkin. Holland appears to be selling him that the transition won't be too bad. Even during the interview on TSN with him in the room, he sold the "we made the playoffs on the backs of our young players".
To go back to the sportsnet interview they posted about him here:
http://www.sportsnet.ca/hockey/nhl/mike-babcock-perfectionist/
Based on what he's said there, my best guess is that he wants to win more cups. Does he want to coach into his 70s? My guess is probably not, though, we don't have any way of knowing that.
So, realistically, where is Detroit? They have been the 5th seed, 7th seed, 8th seed, and 6th seed in their conference. With the core getting older, Babcock may see some years coming in limbo. Not good enough to be a contender, not bad enough to get the top picks. Does Babcock want to wait 3-4 years to finally decide to Bottom out?
I think thats the real allure of Buffalo. The blank canvas with the ugly parts of the rebuild over with. Being able to dictate how the team plays and being on the same page with the GM on what they are trying to build.
After doing some thinking, I think he chooses Buffalo. He opts for a challenge and a risk where he sees a defined path vs Detroit, where he sees a likely rebuild with no real clear way to go from a good team to a great. Add on top of that better financial security, a known GM and ownership committed to winning. I think Detroit is the "easy" choice for him, but opts to take on a challenge here.