I'd like to see both sides work it out to keep Peyton there, but with that organization, I don't see it happening. Who knows how much Peyton feels he deserves from them, and we could all guess how much they're willing to give him. If they want to consider themselves in a "rebuilding" phase, then there's no guarantee they'll be successful again like they've been under Peyton.
To me, the best thing the Colts could do is keep him aboard, and say if he can get a Division Title and 10 wins or more, then they'll give him a big bonus. But, if it seems he's going to struggle, then it's time to pull the plug and start investing in the future, and if he wants to stay on board and help in that process, then fine. If not, fine still.
For real, Peyton is probably making more on his advertising spokesman deals than the Colts are paying him, when it's all said and done. Heck, if the Colts retain him then that's unquestionably THE biggest game during week 1 next season. No matter what, he puts butts in seats and rakes in the huge viewer ratings. I think they'd be fools to not try and work something out with him. But, I'm just a fan who sits on the couch and watches the games, they're the millionaires playing the game.