1. I believe that the $5,767,500 (amortized over three years) listed on Miguels site INCLUDES a $3M option bonus due in the immediate future. If true, the Patriots can (and should) release Dillon now. Our 2007 dead money for Dillon will be between $2.5M and $3M. (I'm not certain that the option bonus is exactly $3M, it may be slightly larger.)
2. Since the Patriots were not likely to pick up the option bonus, I imagine that they were negotiating an extension that would have reduced his total compensation. I think that this announcement from Dillon means that the negotiations have failed. He may be serious about retiring, but the way he is going about this suggests to me that if he can find a team willing to pay him good money (say $4M), he is up for another year.