Harbaugh indicated after the end of the season that he wanted Smith back "for continuity". This indicates to me that having him back would provide the team with a smoother transition, instead of a rushed one. Based upon what is happening I think that the team would prefer to have Alex back at the price they think is correct for him, but are perfectly willing to go in a different direction if he is not willing to sign for that amount.
That would imply that they are willing to go with Kaepernick if Alex does not sign, though I suspect that they would bring in Johnson or someone else to compete with him or at a minimum fill the number 2 spot.
[ Edited by rdc1 on Mar 14, 2012 at 8:44 AM ]