Without access to health records, Rich Harden looks like a great candidate to offer arbitration - at the very least, if not offer an incentive-based contract. Yes, he kills bullpens, but not if you pair him with Sean Marshall who also lacks endurance to be a starter. Yes, he can be maddening, breaking down, but when healthy, he is the best pitcher in baseball. I can understand thinking Harden isn't worth a long-term contract, but that Jim Hendry wouldn't even offer arbitration mystifies me.
That said, Jim Hendry has been pretty good at knowing when to cut bait. Consider
In 2004, Hendry traded Hee Seop Choi, who had just had a promising rookie season - Choi was out of baseball two seasons later.
In 2005, the biggest story was the trade of Sammy Sosa - who was miserably bad in Baltimore and not given a contract the year following. Hendry also let Mark Grudzielank go; Grudz was decent the following year, but his OPS+ dropped 5 pts to 93 and 3 more points to 90 the next year. Moises Alou was also let go - a mistake as Alou was very productive throughout his next contract, but an understandable mistake given Alou's age of 38. He did only play in 123 games the next year and 98 the year after that. But if Alou was a mistake, letting Matt Clement go was brilliant. Clement had been excellent over his three Cub years and was only 29, but Hendry let the Red Sox nab Clement on a three-year deal. Clement gave the Red Sox one slightly below average year, one half of a bad year, and one entire season lost to injury.
In 2006, it was Nomar let go - and Nomar was unable to find a job playing middle infield. He had a productive partial season as a 1B, but his bat failed him the following year, and his health failed him after that.
In 2007, Hendry let Mark Prior go - Prior has yet to pitch again in the major leagues.
In 2009, Hendry let go Kerry Wood, and traded Mark DeRosa and Jason Marquis. Marquis had an excellent season, although Sean Marshall and Randy Wells, who replaced him were better and Marquis also had his characteristic second-half slide. DeRosa and Wood, on the other hand, didn't fare as well. DeRosa's season was marred by injury and in the end, he and Mike Fontenot had identical triple slash lines v. RHP. I'd argue that moving DeRosa turned out to be a great decision - it's just that replacing him was miserably done on multiple levels. Kerry Wood was very poor in the first half of the season, making it look like letting him go was very smart. Wood turned his season around and, over all, it was right to let him go (although he might be worth bringing back in a trade of bad contracts if possible).
All in all, it seems like Hendry should only regret letting Moises Alou go, while, on the other hand, he's made some extremely prescient decisions, letting players go that I would have thought should be kept. That makes me think twice when I hear that the Cubs seem set to let Harden walk. Jim Hendry's track record on these things has earned him the benefit of the doubt.