Apparently, Nixon did know what Felt wanted:
Nixon: "Well, if theyve got a leak down at the FBI, why the hell cant Gray tell us what the hell is left . . . ?
Haldeman: "We know whats left, and we know who leaked it.
Nixon: "Somebody in the FBI?
Haldeman: "Yes, sir. Mark Felt. You cant say anything about this because it will screw up our source and theres a real concern. [Attorney General John] Mitchell is the only one who knows about this and he feels strongly that we better not do anything because . . .
Nixon: "Do anything? Never.
Haldeman: "If we move on him, hell go out and unload everything. He knows everything thats to be known in the FBI. He has access to absolutely everything . . .
Nixon: "You know what Id do with him, the bastard? Well thats all I want to hear about it.
Haldeman: "I think he wants to be in the top spot.
Nixon: "Thats a hell of a way for him to get to the top ... Is he Catholic?
Haldeman: "Jewish.
Nixon: "Christ, put a Jew in there?
Haldeman: "Well, that could explain it, too.
Yes, yes, of course you're right.
The tapes have them backing away from action against Felt, as he will spill his guts.
But they could not have known that leaving him alone was not enough. They could not have known that, if they didn't give him the top job, he would spill his guts anyway. From that point of view, they didn't--couldn't--know Felt's "terms."
But what I gather from this exchange (thanks for posting it), is that, even within the meltdown, they simply knew Felt would not be a good FBI chief, on character reasons. My reading, anyway.