It all depends on what you are paying him.
If its $11 million a year over the next 5 years, then I don't think it will be terrible, since I don't think that is vastly overpaying him (although its not a good deal for the C's either).
The problem comes when he starts looking for a deal STARTING at $11 million that has 10% raises each year. So its $11m in 2010-2011, $12.1m in 2011-2012, and suddenly it is 2015 and he is making $16 million a year. And if he does not dramatically improve his jumper, and takes a step back when he is not surrounded by such good players, instead of being overpaid by 2-3 million, he may be overpaid by 7 or 8 million. And I think we can all agree that $7-8 million is enough money to significantly improve your team.
But for me, the real question with Rondo is whether he is good enough to be one of the centerpieces of the team going into the new era of Celtics basketball. If he is, then he is worth $11 million dollars. If he isn't, then you are better off using that salary slot for someone else.
I have been high on him since before the C's drafted him, but I have been having more and more second thoughts after seeing him stiffled by defenses two straight years in the playoffs, that used his inability to shoot as an opportunity to shut down the other players on the floor like Pierce, Allen, and House. I know he is young, and can hopefully fix that...however, I am very hessitant to give him that kind of money until he DOES fix it, otherwise, it could be a fatal flaw that could be bringing the entire team and organization down for years to come.