I think the main factor for the Jazz to consider is not how desperate the Knicks or other teams might be to trade for Donovan, but whether Donovan is on a ticking clock before he demands a trade and announces only a small list of teams he'd be willing to sign an extension with. At that point, Donovan would chill his market. He'll say he's willing to go to New York, LA, Miami or Chicago and sign an extension with one of those teams. Then only those teams will be bidding for his services.
Donovan can't do that right now because he doesn't have leverage until he's closer to free agency and he doesn't know what the landscape of the league will look like at that time. An argument can be made that if the Jazz feel they'll have to trade Donovan, it's better to do it sooner rather than later, and do it as a preemptive strike before Donovan tries to dictate his destination and control his market.