I worked in orthopedics and fracture management (in sales and marketing, not clinically) in a previous life 20 years ago and never heard of such an injury, that's how rare it is. CBS mentioned there's only
32 documented worst-case scenarios (where the posterior tibialis is dislocated) in the English language.
Roy might have posted something from Dr Jeffries eariler, but here's a graphic of what it is and how it affects the foot:

Basically my read of it is: the tear of the flexor retinaculum itself isn't the issue, it's the fact that the tear can cause the posterior tibialis tendon to dislocate as a worst case scenario. Even in a non-worst case scenario it could cause pain and instability that could impede his performance. The posterior tibialis tendon is one of the most important tendons of the foot, it connects the calf muscle to the bones in the foot to provide stability in locomotion, particularly as the foot and ankle flexes and articulates.
That's why he's walking around without pain or issue, it in and of itself isn't that bad, it's what can happen to more important tendons when it is torn which becomes the issue. This isn't the best analogy, but it's the best I could think of - it's kind of like a torn seatbelt in a car in a way...a seatbelt keeps you in place while driving. If it's torn you can still drive, but if you get into an accident or have to brake suddenly you could hit the steering column or dashboard, or at worst case go through the windshield. That would be the "dislocation of the posterior tibialis tendon" which could have more serious repercussions for KT.
Now the chances of that happening? What are the chances of a car accident happening when you're not wearing your seatbelt? As mentioned earlier there's only been 32 documented cases (so there could be more undocumented) of a posterior tibialis dislocation occurring as a result of a flexor retinaculum tear in English medical literature. What's the chance KP becomes the 31st? Now add to that the fact that you're driving high speed in a really bumpy road where you are getting jolted back and forth without your seatbelt on, can you handle being jolted back and forth? Is it affecting your ability to drive?
So in terms of his being able to play, the question is really a) if he has pain (which he probably doesn't) can he play through it; b) will there be loss of motion or articulation of his ankle or foot which could affect his production or mobility on the court; and c) what would be the risk that it aggravates and damages other parts of his foot.
The Cs have to weigh up all the above and decide if it's worth taking a shot with him, see how he is moving, see if he can hold his own or perform at a level that he wouldn't be a net negative on court, or would the team be better served having someone else on the team (Kornet, Tillman, etc) replace him. Put it this way - if he looked like he did in the 6th minute of the 4th quarter when he suffered the injury, he's not going to be on the court for very long.