Kudos to Tim Tucker for this lucid explanation of Mike Vick's contractual situation. A lot of the article is devoted to explaining to the casual fan that NFL contracts are not guaranteed and that the Falcons aren't really committed to paying $130M to Vick. That said, Tucker lays out the case that cutting Vick would cost $6M and change against this year's cap and $15M and change against the team's 2008 cap. With the salary cap projected to be about $115M in 2008, that would be a hefty charge, but not impossible.
The most likely scenario is that this year is Vick's audition for Bobby Petrino. To date, Vick has been a slightly above-average quarterback who's been paid as if he's Brady, Manning, or McNabb. If Vick improves in Petrino's offense, then the team will keep him and possibly look to negotiate his salary down a little so they can make a run at the Super Bowl by adding pieces. If Vick stagnates, then he'll be gone for football reasons. I don't think the dog-fighting allegations will be anything more than a secondary consideration, since it appears that he is not going to be charged, let alone indicted.
That said, the allegations are going to be hanging over Vick and will likely be considered by Blank, McKay, and Petrino when they make a decision on Vick's future. The Falcons braintrust are too smart not to realize that the federal prosecutors might indict the individuals running the ring from Vick's house and then seek to flip one or more of them in return for testimony against Vick. (Len Pasquarelli does a good job with this "Vick isn't out of the woods yet" piece. The Feds' decision to go after Vick will likely be determined by whether they see Vick as a major player in the dog-fighting ring. In my heart of hearts, I think Vick knew what was going on and was a passive investor, but wasn't a major player. In that case, it seems unlikely that the Feds will go to the trouble of flipping a major player in order to get a famous, but relatively minor participant, unless they want Vick to be a sacrificial lamb to highlight the evils of dog-fighting.
Getting back to the on-field issues, Mark Bradley is optimistic about the team. (Bradley seems to be on fire recently. I can't stop linking him.) Vick's Sturm und Drang offseason has colored the views of most national pundits regarding the Falcons, most notably Fox Sports, which ranked the team 29th in the NFL a few weeks ago. Vick got too much credit when the team won and now his off-field problems have caused opinion to swing too far in the opposite direction. The team had a very good Draft, they have a better coaching staff, and the overall talent level seems to be heading in the right direction (although I have concerns about the offensive line adapting to Petrino's offense). Vick may be distracted right now, but he's never been that good, so would a slight decline in performance really be that notable? It isn't as if the Falcons are dependent on Vick the way the Colts are on Manning. Additionally, part of me is giddy with excitement over the possibility of Vick playing with a major chip on his shoulder and viewing this season as his chance to shut all of his critics up. This off-season has made it much harder for me to root for Vick the person, but there is a good chance that I'll be happier with Vick the player come September.