It seems that the issue of "Player's Rights" is at the center of the impasse between the MLS owners and the Players Union. In particular, the right right to free movement when a contract expires or the club fails to pick up an option, or even waives a player. Neither side seems ready to compromise on this issue, leaving some uncertainty around the 2010 MLS season.
Nobody wins in the event of a work stoppage, so it is beneficial for both sides to reach an agreement. My proposal is probably not earth-shattering, or even something that hasn't been considered in pieces already. But it is reasonable and requires some concessions from both sides.