I think it was a poor business decision to not keep Lin but from a basketball standpoint I can see the reasoning. Lin is a distraction off the court. So often was the case last year that the media would go to melo or stat and say that Lin was making them irrelevant. With that contract he would be making much more then J.R. and Kidd and Felton, all vets who are better players then Lin, So I can see the thought process, especially after the rockets changed the contract after the knicks let it be known they would match. I'm sure they understand that Lin was going for his payday (and it might be his last chance to do so), so i don't think they hold it against him I just think that they did a good job hedging their bets and getting felton back into the fold.
Lin will be better served in Houston, where the Yao Ming fans will be happy to buy his Linsanity merch.