This is probably beating a dead horse, but here are the options the Yankees have with the Derek Jeter negotiations.
Option A: Pay Jeter whatever he wants, as he is the face of the franchise!
This option is one that a lot of Yankees fans seem to like, but I am not one of them. Jeter is not worth whatever he wants to be worth, and in my opinion is not an unreplacable face of the franchise either. Mariano Rivera could easily slide into that position, and sadly enough many people think Alex Rodriguez is the face of the franchise already.
If the Yankees chose this option, they would probably be paying Jeter about double what he's worth over double the amount of years he is worth. He is likely willing to somewhat compromise, so why not do option B?
Option B: Negotiate extensively with Jeter, but let him walk if he won't accept a deal that is good for both sides.
This option is the one I would like the Yankees to do. The Yankees have tons of money, but why do they have to spend so much on someone if they can compromise? Already we can tell it will be a tough process, but any process with a long tenured employee can be that way.
Jeter will be stubborn and the Yankees need to be just as stubborn. Don't offer him any insulting contracts (make sure he gets paid more than A.J. Burnett, for example) and don't offer him a one or two year deal, as he'll find that insulting. A 3 year deal would be best for the Yankees, but a 4 year deal isn't awful, either. If he refuses to go south of 5, we may have a problem.
If the whole negotiation process doesn't work out and Jeter decides to go elsewhere (which has a 1% chance of happening) the Yankees aren't exactly set at shortstop with Eduardo Nunez. Nunez is a better version of Ramiro Pena, imagine an Alex Cora type. Would you want Alex Cora starting at shortstop for the Yankees?
Option C: Negotiate the entire contract through the media, play hardball throughout.
This and option B may be the two options that the Yankees combine in their negotations. The Yankees and Derek Jeter both know the other party will want the fans on their side. The media eats up any good quotes about the negotations and will continue to do so. Look for both sides to take advantage of that.
Option D: Let Jeter walk, move Kei Igawa to shortstop, sign Cliff Lee to shore up AAA rotation.
Gotta have sarcasm in the post somewhere!