They made that offer knowing that he would turn it down. He still would have been the highest paid manager in the game, (especially with the incentives) but any paycut would have been viewed badly by the players. Steinbrenner wanted him gone, but didnt want to look bad to the fans. This offer accomplished both.
IMO, Mattingly is not ready. I like Girardi, but managing players that you recently played with could be tough. LaRussa always seemed like a tool to me and I dont know if he would fare well with Steinbrenner and the NY media.