The Rangers might not be so leery of Sheets if they hadn't just gone through this flexor tendon thing with Jason Jennings last season. Sheets is trying to bounce back with rehabilitation, rather than surgery, but, like Jennings, he could wind up under the knife anyway.
That's why the Rangers want to structure a deal that would be laden with incentives, to protect themselves in case Sheets breaks down again. Sheets would like to pitch here, believe it or not, because he lives in Highland Park and would be reunited with pitching coach Mike Maddux, but if another team blows him away with a lot more guaranteed money, they'll pass.
That last half-sentence might explain why Sheets is still out there. He probably wants to make sure there isn't a 5 year, $75 million offer that he'd be passing up. If he's going to get a 2 year incentive-laden deal, that deal would be available if he signed in November, December, or now.
So from his perspective, it makes more sense to wait and see if someone panics and moneywhips him. But time, it appears, is starting to run out...