He deserves a five year contract extension. I didn't think his old deal was up after the season, I hadn't read anything about it this year, and I'm guessing he still had a couple of years left on his original contract and this takes the place of the remaining years. Some team would have probably asked for permission to talk to him, although I doubt Bob Harlan or the new team president would have given it.
He's done a great job rebuilding the roster and assembling the coaching staff, but he's also shown an ability to adapt and learn on the job. In his first season, he was far too eager to dump veterans like S Darren Sharper and WR Javon Walker who still have some quality seasons left in them. It seemed like the drafting of QB Aaron Rodgers and the departure of so many veterans was designed to encourage Favre to retire after the 2005 season. Starting after the 2006 draft, he's changed his ways and kept the remaining veterans on the team and signed players like CB Al Harris, WR Donald Driver, and RT Mark Tauscher to reasonable extensions to reward them and keep them happy in Green Bay. It might be often overlooked on the youngest team in the NFL with so many players that he signed, traded for, or drafted, but the core of the team is the veterans he has kept and they are the leaders of the team going into the playoffs.