Of course they did, but nobody turns down an NFL HC job. There are only so many available and those chances only come around once in some coaches lives.
Plus, they only knew Kyler from outside the building and there's enough there for any coach to think they can work with that and fix the issues. Kyler was only 26 at the time, and HC is going to see that as putty to mold.
Nevertheless, he was locked in to Kyler and didn't even get to work with him in earnest until several weeks into the season. Petzing might have been telling him after a couple of weeks of practice the Kyler had serious limitations, we'll never know. We do know he's had no choice put to start him and say how great he is in public.