It all came down to years. As I recall, Danny offered two, and Tony wanted three. In hindsight, it seems like an easy decision: Tony as an elite defender, and played very well as a backup SF (a position we later traded our starting center to fill).
However, in Danny's defense:
* Tony was injury prone. At the time, he had missed 28, 36, 7, 49, an 31 games in the previous five seasons. Committing guaranteed money to him for three years was a risk;
* Danny was preserving cap flexibility. Between the pending, then-unknown CBA and a ton of expiring contracts all set to time out at the same time, Danny wanted to preserve the opportunity to make a big free agent splash. Tony's salary could have impacted that.