Have to say, this is rewriting history!
Ottawa was willing to let him go because he wasn't going to sign there. Simple as that...no need to invent reasons. There might have been a light pink flag 20 games in, but 60 games into the season and it looked like Karlsson was the best defenseman in the league. Everyone (at least here) wanted him to be resigned. People knew there were injury risks going forward; there were worries about Karlsson fitting into the system and how he'd age, but what you're ignoring is the calculation is keeping Karlsson or basically doing nothing. With Karlsson, the Sharks had (and may still have) a decent chance at having a top-5 player in the game on their roster. Without Karlsson, they had practically no chance.
However, is fair to say that even in his prime, Karlsson was prone to slumps, especially defensively. It is, in my view, not dissimilar to how people rave about McDavid, Mackinnon, and Matthews while kind of forgetting what a disaster they are defensively (Mackinnon less so). Going forwards, we have to come to grips with Karlsson giving with two hands and taking with one.