I think Holland has a soft spot for Chelli and doesn't want to be the "bad guy" in the situation. Chelios wants to play another year, but I don't think that Holland should re-sign him because it's not in the best interest of the TEAM.
If Chris can honestly say to himself "the Wings will be better with me on the roster" than he is only fooling himself. I was in the "Chelios is a valuable mentor" camp at the start of this past season even though he doesn't give up the body anymore, lets the opposition get to the puck in the corners first and then "tries" to tie up that player until the center helps him, and his speed has suffered. During the season I started to see him degrade even more which is unfortunate.
Your time in the league as a player is up Chris ... retirement is before you ... embrace it and let all of your fans remember you as the great player you were. There's nothing more painful than watching a player trying to keep up when they are obviously past their usefulness to the team. The last time I saw Chelios up close and in person he was at a Cubs/White Sox game ... drunk off his azz with a wh*re under each arm (even though he's married). If he insists on playing another year with the Wings I will probably remember him that way.
