I don't think Heupel puts himself in great danger. I think Heupel and every other football program are already in great danger no matter what he does.
if you let Nico walk, som SEC team will scoop him up and beat us over the head with him and simultaneously signal to the country that TN isn't a place good QBs should think about dealing with.
if you negotiate with him and give him what we wants, the next QB will just ask for more.
Without better regulations or collision by the power football programs to all agree to only pay x amount, then the bleeding will continue indefinitely.