Do anything to keep him
Try to keep him. Everything short of handcuffing him to his teammates is fair game.
Seriously, great players who grow to be as tall as trees simply don't grow on trees. The Magic have the best center in the universe. They had that before (Shaq), couldn't keep him and watched him win titles elsewhere.
Do you think they won't regret letting another future Hall of Fame center go? Sure, Howard ultimately might want to leave, but he's also forcing the Magic to do everything in their power to build around him by bringing in a top scoring guard or help in other forms.
And why is that bad?
It's good for him and good for the Magic.
Dare Howard to leave
I'd call Howard's bluff. The Magic are winning. They also, per the collective-bargaining rules, can offer him an extra year and higher annual raises in a long-term contract.
Try to acquire another strong player. Keep winning. Dare Howard to leave in free agency. Though him walking away from $30 million is somewhat misrepresentative because he would make up some of that in his next deal, he would walk away from the extra year of security.
Unless Orlando can get a package similar to what the Nuggets scored for Carmelo Anthony — and Denver clearly won that trade — you keep Howard past the deadline and call his bluff. There's always cap space if he leaves.
Trade him ASAP
Trade Dwight Howard and move on. This saga has lasted long enough. There has been Howard trade speculation for two seasons. It has been unfair to the players who actually want to play for the Magic.
The Magic have had a "The Decision" moment throughout the season. At least Howard has one-upped LeBron James in one category. When was the last time anyone discussed anything about Orlando's play on the court? It has gotten to the point where it seems wins and losses are secondary.
Howard has made it clear he wants out. So it's time for the Magic to grant his wish and start the rebuilding process. Get it over with already.
Get something in return
I'd move the entire franchise to New York. Wouldn't lose him then.
Seriously, I'm in the compensation camp on Howard. I think the Magic need to get something in return if they can, assets that won't hurt your salary cap or a rebuilding process.
But it's not as easy to trade a future Hall of Famer as you think. Not when Howard can veto any deal by holding the power to re-sign. Who'd waste sending a nice player to Orlando for the chance to rent Howard?
Howard is the deal-maker and the deal-breaker. He has all the leverage and has been playing NBA hardball, clearing a path to the Nets. The way it looks, the Magic, when the dust settles, are going to come away with dust.