From the reports, let's assume Girardi will sign.
Regarding Callahan, it is a catch 22. I am no Sather supporter, but this is a very touchy subject and a tough position to be in. Callahan is a "heart and soul" player, if that counts as a legitimate thing, and leads by example on the ice. He is always contributing, either on the scoreboard or by doing what he can to shift each play in our favor. He sacrifices his body, he kills penalties at an elite level, he has his head on straight and understands what it takes to win and what it takes to be a professional athlete in New York City.
Some may not subscribe to those "intangibles", but the more players that are shipped out that possess those qualities, the more you continue to strip away your identiy. It would take quite some time to find a suitable replacement that will do the things he does and brings the same never-quit mentality.
On the flip side there is a business.
Personally, i feel using emotion and business when making these decisions is not wise. Rather, what is a good hockey decision. What decision makes the team better. Not the product, not the entertainment, not what sells more tickets, not what makes fans or management happy. What is the smart hockey decision. Take into consideration chemistry, identity, longevity, and function within the limits of the salary cap.
We can see this is a touchy and polarizing subject. Unfortunately, no matter what happens, there will be unhappy people. We can just hope that management makes a smart decision based not on what business or emotion dictates, but what is best for the team and what makes the team better moving forward.
If he is traded, personally i hope there are certain personality and player types that are avoided. Avoid enigmatic players that are all skill and dont possess the right mentality. That means no high-risk players such as Yakupov. No KHL risks. No players with prior serious injuries, specifically head injuries. Make sure the main piece coming back is a young player that has leadership qualities, has won in his career (NCAA Title, Memorial Cup, etc), fills a specific role (top 6 center, scorer, power forward, etc), has their head on straight, work ethic on and off the ice. The return doesn't need to be a #1 pick or a former #1 pick, but a player they specifically target who fills a specific role, who exemplifies the identity they want to instill. Be it a forward or defenseman (preferably a center).
You simply can not trade Callahan because of cap implications, for what ever return presents its self. If the return isn't there, then figure out a way to make the cap work. This isn't Del Zotto we are discussing. Del Zotto SHOULD have returned something more than Kevin Klein, a 29 year old "solid" borderline top 5 defenseman with no upside. Yes he fills a role, yes he is signed to a manageable contract. Fact is Sather waited until the coaching staff completely evaporated his trade value.
Which brings us to the root of the problem. 70+ year old Sather. It begins and ends with (James Dolan, really) Glen Sather. If he can't figure out a way to either A- sign Callahan and manage the cap in such a way that he can further improve the team, or B- get a cornerstone piece in return for Callahan, then Sather needs to be fired on the spot. And not just from the GM position, but as President, as well. He has had his grubby fingers on this organization for 14 years and he has gotten it nowhere. His time has come and gone a long time ago.
So, what is the right move, here? Its a profound situation, and there is no easy decision.