This move confuses me for a few reasons.
I never got the impression Dolan was a win-first kind of guy. NYC is the hub of big-money entertainment and, from that standpoint, Lin was the best thing that happened for them. I understand that contract is rough for someone that hasn't proven himself at all, but at the same time, I think the best option is to keep him from a practical and business standpoint. This team isn't winning anytime in the near future - why let go of the best thing that has happened to the franchise in a longgg time?
In defense of Lin, he had an amazing performance last year. Right now, yeah...he's a liability on defense. He's turnover prone. He hasn't played enough to warrant big money. At the same time, he's an athlete (defense can improve), he came to in on the biggest stage (steep learning curve, learning to play at this level - turnovers will drop), and has proven he embraces huge moments. He's going to be solid and, if nothing more than that on the court, a huge attraction to a franchise that has nothing else going for it in the near future.
Also, I don't understand how someone labeled a "pick-and-roll PG as a joke" - is Steve Nash not arguably one of the best of our generation? Forget Nash here, even - the Knicks were at their best, in a long time, when Felton and Amare were a nasty 1-2 punch in a pick-and-roll heavy offense.
I think Melo is a curse. He's so good offensively that he's an obvious max-contract guy. At the same time, he's such a complete ball stopper that he requires a team to be built around him. And as a liability in every other facet of the game, building around him based on this and, imo being more concerned about being cute and liked than winning, is a huge mistake.
I'm obviously biased but I would do everything in my power to trade Melo, amnesty Amare, and start from scratch. If their goal is to win a chip, they've gotten themselves into a hole they can't climb out of and it has only gotten worse this offseason.