Well, you have to factor in the Nonis Constant. What is the Nonis Constant, you say? Well, it is basically the average salary he signed Tyler Bozak to minus Bozak's more realistic value (~800 K). Therefore, the Nonis Constant is:
$4.2 M - $0.8 M = 3.4
As such, once you factor in the Nonis Constant, Phaneuf's potential contract looks far more reasonable:
$7 M - 3.4 = $3.6 M
See? In fact, taking this into consideration, $7 M is rather cheap.