Here is a guy who has made a lot of mistakes, but has a chance to prove himself.

He looked awesome before the injuries, and managed to keep himself clean this year.  On the other hand, an errant drug test and injuries may have given him a unearned black eye in the scheme of things.  He seems to regret the news breaking out about his children, but I don't know what kind of father he has been (in terms of child support and time with those children).  He does sound sincere about "making things right".

From a purely on field point of view I hope Henry comes back.  Young is NOT an everydown back, and neither is Hall.  The two of them together would not solve things either, as neither is a bruising, power specialist.

Walker would make life a lot simpler for Denver if he returns.  As has been pointed out, Stokely is not an every down starter, and I would like to see someone taking the pressure off of Marshall (or Marshall taking pressure off of Walker).  If Walker doesn't return we have more voids to fill on the team.  If Walker returns we can focus on a few key needs on defense.

only if he takes a pay cut and signs an incentive laden contract.  If he hits his goals, he gets paid...if not, he doesn't.  I would also include if it is not there already, if Henry tests a true positive drug test, he's gone and there is no money owed.

No question he'll take a pay cut. He sounds like he already has agreed to one, and it's being negotiated right now.  He wouldn't do well on the open market after his 2 big question marks (drugs and injuries) both popped up in a big way this season.

I still think Denver drafts a back somewhere between 2nd and 5 round.  Getting Henry back (cheaper) with Young (cheap) and Hall (very cheap) for 2008 is a much better spot than the Broncos were in going into both the 2006 and 2007 seasons.

The red zone issue is Denver's biggest problem on offense and I have to blame the O-line more than the backs, but Denver obviously needs to change it's red-zone gameplan for 2008. How many years in a row has Denver had trouble in the red-zone?

relationships.  As Pat Bowlen said, personal affairs are just that, personal.  If he has wronged the mothers then there is no doubt that they will or have sought remedies in civil court.  If his personal life impacts his market appeal, that is an issue for his agent to work on, I doubt that the Broncos as a marketing entity are negatively impacted by Henry's personal decisions.  

As long as he can be a hard charging power back the management should try to keep him on the team.

I am not 100% sure of the exact details since part of his original signing bonus was not paid in 2007 due to his suspension/appeal.  But I think that he is owed $6 million in the offseason in various bonuses and will have a base salary of $720,000 in 2008.  This presents an interesting quandsry for all sides.  The advantage of signing/option bonuses is that they get prorated for salary cap purposes over the life of the contract (in this case it would be $1.5 million for each of the 4 remaining years on the contract).  Incentives count against the cap all in a single year (either the year they are earned or the following season, depending on the details of the incentive).  So I don't think the Broncos would want to turn the entire bonus into incentives, but they obviously don't want to pay out $6 million based on the way the last season went.

Other than converting the bonus to incentives, the Broncos could try to move its due date back.  They could restructure the deal so that there was an option bonus due during the season (say December 2008).  Either Denver pays the bonus (which I think would be prorated over 4 years [2008-2011]) or Henry becomes a free agent after the season.  The problem with that is that it could become an in-season distraction.  The better move for Denver would be to push the bonus back until the next offseason when it would be prorated over the last three years of the deal.  

Henry seems to understand the situation so he will probably be willing to make concessions to stay with Denver.  At the same time, I am assuming that Henry is willing to move money around, but is not willing to decrease the total potential value of the contract.  I am thinking Denver will move $4.5 million in bonus money to next offseason (where it will be prorated at $1.5 million a year which is the same as his current contract).  The remaining $1.5 million in bonuses will be converted to some combination of base salary for 2008 or roster/playing time incentives that Henry should reach if he stays healthy and out of trouble (and which would count against the 2008 cap)