This sounds like the absolute best case scenario:
1) He's not going to break news on Mike and Mike. C'mon Man! The best case scenario is he'd give a really, really lukewarm denial.
2) He gave a lukewarm denial ... and not even to the job but rather to the terms!
3) Once he got in a quick blurb, he moved the conversation along. Look here Grudenites: The Grude is a smart man. He likes Tennessee (even if he doesn't want to coach here). He knows the scuffle this is causing. If he really had no interest, that was a perfect time to put it all to rest and do Tennessee a favor. By moving the conversation along, he made a very conscious decision to not take that opportunity.
4) It's the Grude in his natural Grudeitat - he knows what he's doing and he did it perfectly.