Well if it is a S&T, then Nate becomes BYC and that will half his trade value. So essentially if he makes about 4M in his 1st year of his extension, his trade value would be 2M.
If Nate accepts the QO, he will be a UFA next season, so maybe NY is thinking they want more leverage/control of personnel next summer in order to make their team more appealing to FAs.
With Farmar's contract, NY has the option of either giving him a QO next summer or giving him an extension. Either way, they won't lose Farmar as they would Nate because he would be a RFA next summer and they can weigh out their options in that manner.
Farmar makes roughly 2M this coming year and a deal for a BYC Nate can very much happen, if LA is willing to take on that cap number (which I really doubt).
If such a move endangers resigning LO, then I'm certainly not for it. But if LA is looking to add Nate and a resigned LO and the only loss would be Ariza, Farmar and money via the luxury tax, then it ain't a bad move.
Nate is a pretty decent option on the wing and he would pretty much be what Fisher is to us. A scoring guard with Kobe and Artest controlling the ball distribution. Or if Nate comes off the bench then Luke and LO control the ball more while Nate spots up and operates from the wing. He is somewhat of a chucker and isn't very efficient, but he still is a threat from deep and if he chooses to slash, we all know the slam dunk champ can finish at the rim.