Meh, $10M will test a lot of guys' "classinesss." I will say this though. We now know that KO was given a letter outlining these events a few days before he was fired. His best opportunity to get out of this with some cash in hand was a quick and quiet exit in exchange for a dramatically reduced payout. If his representation was telling him otherwise or suggesting that he hold out for the full $10M they were doing him a huge disservice. The let's crap on a beloved Hall of Fame coach gambit is not going get them a dime and the entire process is trashing what's left of KO reputation.
I wouldn't expect it. But sometimes you need to play the long game. No MLB player with a huge inflated contract that they aren't worth is going to give up the money. Because it won't impact them later. But you see executives and others stepping down all they time and giving up big salaries. They are thinking long term. Employers respect people who hold themselves accountable.
A young-ish coach, who has 30 more years of potential employment and still has a good reputation should have had the wisdom to do what you suggested. Step aside gracefully, admit some mistakes and take a small buyout. Then look for work elsewhere. Now his reputation has taken a further hit, and when UConn bounces back under Hurley he will look even worse.
If he thinks he really was doing the job and trying his best, he needs to see a mental health professional. I think he's got some real problems and is in danger of going down a very dark path. I hate to see that. As much as I wanted him gone, I would have liked to see him land an NBA assistant job and turn things around for himself.