Blah blah blah, your claim they could pay off the FSF was wrong, and you said it was an option.
It all depends on what kind of deal they can work out. The FSF cannot legally force anyone to release their code under any license. No judge would allow that to happen, and would probably force the FSF to accept compensation for violated IP along with corrective measures such as a recall.
Of course, with millions of routers sold, the cost to Cisco would have been HUGE! It's much cheaper to release a few grand worth of code under the GPL. Still, their choice.