I am pretty sure I remember the press conference. And the tears.
Football isn't boxing and you can't just step back into the ring where you left off and choose your opponent.
After a decade of flirting with retirement to get the Packers brass committed to winning now, it was clear his agenda conflicted with the Packers. It was a piece with the other power plays he had pulled as acting GM with the Packers. Thompson countered with a play of his own (plus M3 and Murphy) and got a 3rd round pick and one year of peace. Favre got his money and his payback a year later.
It was one of the ugliest business negotiations outside of a Hollywood divorce ever carried on basic cable. But the Packers got a Super Bow victory AND another half decade + of being talented enough to earn another one. It was a wise decision, poorly executed.