Depends on what he asks for. If it's remotely reasonable they absolutely must sign him. If he's trying to leverage the idiotic Howard contract into his negotiations then he's gone.
If it turns out that it is in the Howard range, then yeah, that would be insane. From what I have read, though, it is an issue of years and not money. Now, while more years=more money, I can't imagine Dunn losing much of his power in 4 years and certainly the walks will still be there. This guy has skillsets that should last another 4 years at least. Really what I am concerned about is what it will mean to lose him. You have to find someone that can replace him, that guy then has to mesh and develop chemistry with the team, and you have to find another way to produce some runs. But, do you really think that he is asking for a Howard-type deal? Even if he isn't, it is going to take some good money to keep him.