If I recall correctly, there was some friction between both camps. Ehrhoff's side thought he was the straw that stirred the drink whereas Gillis saw him as a beneficiary of the system. The difference in getting a deal done was small (400-500k/year) but Gillis declined to sign him out of principal.
In hindsight, it was a good move as Ehrhoff showed his limitations in Buffalo (which was the start of his decline) and Edler hit career numbers in 2011-12 assuming his role. The biggest error with the whole thing was keeping Ballard and not making any legitimate attempts to improve the offense.
Unfortunately we don't have that luxury in 2024-2025. There is no young defenseman readying to make a jump into a top pairing role here. Overall, what you see league wide is a scarcity of top 4 defensemen, especially via UFA. It's why you may see guys like Zadorov and Myers command huge dollars via UFA.
If you want to ensure cap flexibility, don't mind taking a step back and think Pettersson (D) and Willander can step into a top 4 role in 2-3 years....then you forego any stupid deal. If you want to make the playoffs again next year, then you sign him at whatever cost.