Orlando was in a horrible position. They basically had no leverage.
Dwight was adamant about going to Brooklyn, but didn't want Brooklyn to give up any assets. He liked the prospect of joining a "fresh" "new" team in Brooklyn with all the hype surrounding it. They'd have Deron, Brook Lopez, top 5 odds of landing Anthony Davis, as well as the Rockets pick (top 14 protected... currently projected 16) and other young players like Marshon Brooks to build around.
Dwight knew that Brooklyn gutting their roster to get him didn't make much sense long-term (as the Knicks did with Melo)... especially when Brooklyn would have enough cap space in the offseason to flat out sign him without giving up any of their assets (the only sacrifice would have likely been Kris Humphries... who they'd renounce to have enough cap room to give Dwight his 20 million a year).
The only other teams Dwight was even willing to consider a trade to were the Lakers and Mavericks. The Mavs had nothing to offer so that left the Lakers. Orlando wanted Bynum AND Gasol. The Lakers didn't see the point in that. They were the only team that could really give Orlando anything of value... Magic could take Bynum or be left with nothing. One other thing with the Lakers here... I'm not so sure it was a given that Dwight would have extended with them if all they had left on that roster was an aging Kobe. I think it was a genuine concern for the Lakers and all the articles (ie: "Dwight Sours on Lakers") may have had a semblance of truth to them. THAT is why I think we were seeing so many Gasol rumors. If you know you're swapping Bynum for Dwight, doesn't it then make sense to trade Pau for a player like Rondo? Landing a youngish PG like Rondo was likely enough for them to lock in Dwight long term.
Dwight also likely didn't want to join the Nets this season, because he knew he would mess up their draft hopes by helping them win meaningless games (they are already out of the playoffs). Dwight's pipe dream was to finish out the season in Orlando and then join Jersey for nothing. He spoke out that he'd like to finish the season in Orlando, because he felt it was the best thing for "the fans". Obviously the guy is a total full-blown moron if he believed that was the best thing for "the fans" or believed that was going to work. He was essentially saying he wanted to just make the playoffs this year and then leave Orlando with NOTHING in the offseason. Basically it was a dirty snake bush-league attempt to lull Orlando to sleep on the fools gold hope of winning a title this year and perhaps convincing Dwight to stick around (even though a title was a long shot and him joining Brooklyn was inevitable).
So now Orlando was in a horrible position. Their only two trading partners weren't willing (or able) to start a bidding war for Dwight. To their credit, they also saw through what Dwight was attempting to do. The writing was on the wall. Dwight was trying to screw them. It got to the point where their best option was to just throw Dwight on the open market and let the highest bidder rent him for the remainder of the season (with the understanding they likely wouldn't be able to resign him, but they could grasp to the hope of convincing Dwight to stick around).... so that's exactly what they did. It was their last power move. "Alright Dwight... the heck with you... we're washing our hands with this ... enjoy playing out the remainder of the season on the Bobcats. The media is going to bury you." Dwight suddenly panicked. He saw how this could play out (he'd be vilified on a LeBronian level). He went into damage control mode... spoke out about how he had a change of heart and loved Orlando and the Orlando fans. He blamed the whole thing on having received "bad advice". He then agreed to NOT opt out of his final year... meaning that Dwight will be locked into a contract with Orlando through 2012-13. Orlando gets their leverage back.
With Orlando now retaining the Dwight Howard leverage (through 2012-13), the Nets suddenly have a mild panic. Deron Williams is an unrestricted free agent. They felt reasonably comfortable they had this Dwight Howard thing locked in, but now there's a likelihood that Dwight sticks in Orlando and Deron bolts Brooklyn for greener pastures. For whatever reason, they end up trading for Gerald Wallace... hoping that will placate Deron into sticking around. That "top 5" pick asset now may be gone... It's only top 3 protected at this point. Still hope for Anthony Davis, but otherwise that pick is going to the Blazers (currently projected 5th). The dream of simply signing Dwight and not losing a single asset may indeed be gone. Another interesting wrinkle to this... Gerald Wallace (like Deron) ALSO holds a player option next year. They are at risk of losing them both AND the top 5 pick. They are pretty confident that Gerald WILL pick up the 9.5 mil player option, though. But ah hah... now what does that do to their cap space? Presuming Deron stuck around and Humphries walked, they were looking at a total committed salary next season of roughly 35.5 mil. If the cap is 58 mil, that would have leaves plenty of room to sign Dwight to his contract with a starting salary of 19 mil. With Gerald Wallace presumably on board, their committed salary (once again letting Humphries walk) is now 45 million. If you're doing math at home, you'll see that means THEY NO LONGER would have the ability to sign Dwight outright. They would need to trade someone to free up enough cap room to bring in Dwight. Someone like Brook Lopez, for example.
See where I'm going with this? Knowing all of what I'm saying... explain to me why Orlando doesn't trade Dwight this offseason while they still have leverage? Do they really want to drag this out again through next year and once again risk a mid-season media circus where they lose their leverage in the process? They are still clinging to the possibility of winning a title this year and convincing Dwight to stick around, but presuming that does not happen, don't they work out a deal with Brooklyn over the summer? If the Nets let Humphries walk and keep Deron and Gerald they will have 45 mil in committed salary. With the cap set at 58 mil, that's only 13 mil in cap space... if they intend to bring in Dwight (who makes 19.5 mil next year), I think they'd have to send roughly 6.5 mil to Orlando to get it done. Lopez makes 4.1. Perhaps the "rest" is filler? Perhaps the "rest" is the Marshon Brooks? Perhaps the "rest" is whoever they sign with the #16 pick (from the Rockets). It does indeed make sense that Brooklyn will be highly motivated to get something done quickly, though... or risk having Deron and Gerald go elsewhere. Seems to me you should be putting your money on Brooklyn sending a nice little package for Dwight... sometime between June 28th (draft day) and July 11th (beginning of free agency). Dwight holds some leverage here still... only teams that know they can resign him will be willing to give up assets for him. So Brooklyn and Orlando will get it done one way or the other.
Only thing that changes any of this is Dwight winning a title this season and having a genuine change of heart (not the fake one he displayed for the media a couple weeks ago when his people put him in damage control mode in an attempt to avoid a LeBronian PR disaster).