I thought Butler was a very good gamble at the time and I still think so in retrospect. Butler was a 20-year-old center who was about league average by every stat (even stats invented since 2006). Finding centers that young who already produce at league average rates outside of the draft is extremely rare. One that played that well under Larry Brown, who typically hates young players, is even rarer. The Spurs signing him for $5 million over two seasons made it an even better gamble.
As we now know, it didn't work out. Butler basically retired from basketball after he got that contract. He showed up to camp fat and wasn't interested in practicing hard. After his contract expired, he was never heard from again. Like I said, Butler got that contract and retired. That's why it was a gamble in the first place. Not much a team can do if a player has no interest in succeeding.
The real mistake, as others have mentioned, was using Scola to salary dump Butler after the gamble failed. The Spurs should have just held on to Butler. He wasn't making much money and that team didn't face a roster crunch. The Spurs panicked in an attempt to clean their books and made a stupid trade. Give credit to the Rockets, but it should also be noted that they basically cheated the salary cap to get Scola (
Yao got Scola a lucrative shoe deal in China that was able to afford him the ability to pay for his buyout in Spain ... the Spurs obviously didn't have such a connection to maneuver around the salary cap like that).