You don't need to tank to get value back for Melo, you already got a potential franchise player in the recent draft, moving Melo would be to free up caproom and get back young assets. What are the chances the Knicks make the playoffs? The team who gets the 8th seed this year is probably going to have a winning record, as it stands all the teams in the hunt for the 8th spot are better than the Knicks and have a + pt differential (Hawks/Pistons).
Also, the free agent crop this summer isn't very good, take a look for yourself -
NBA Free Agency 2016: The top players
The Knicks are most likely going to miss the playoffs, so how far is Melo taking them? The East is better and squeaking in to the playoffs with a 36-46 record doesn't seem like it'll be good enough this year, as it stands the Hawks, Wiz and Bucks are also on the outside looking in so it's going to be a competitive battle for the 7th & 8th spots.
If the Knicks are out of the playoff race by the trade deadline and the Rockets come with some solid offer to save their season, do you turn it down? At what point do you realize that having Melo on the Knicks isn't moving the needle enough, especially when there are teams in the East that are young with solid rosters (Pistons/Magic) that won't be going away.