It might make more sense in letting your players go, and try to win them back in auction at a cheaper price. If Rajasthan choose to retain Warne, they are effectively foregoing 1.8 mn, which they can use in the auction to get much better players. Probably Warne in the auction might go for something like 700K-1mn, that would still mean more finances available to purchase other good players.
Remember, each team has 9mn to spend for its players, and they would all be looking to get 5 good players than 1 awesome player and 4 below average.
Yeah, in Rajasthan's case, it will make sense for them to let go of Warne and try to win him back through auction (if not, they can always get better players). But Chennai/Mumbai will definitely retain their icon players because losing them to other teams is not an option (considering the status of those two players, Dhoni and Tendulkar).