Depends, so much spin around what he allegedly can and can't do. If he really has lost his trowing ability like some reports sound like he has, he should retire. Something tells me it must be true, otherwise the Colts would try to keep him around another year or two to groom Luck. Maybe not pay him the 28 mil, but I would think there would be more news about the Colts trying to renegotiate his contract.
On the other hand, they got rid of a lot of people well before the decision and the writing was on the wall that they where cleaning house.
No matter what, I would be surprised if some team didn't take a flyer on him. Think low money guaranteed 1 year contract. If not for anything more than a PR move, or more likely to groom their own QB of the future. I don't see him being a "backup" out of the gate.
If you look at the amount of teams that need a QB, even one that might not work out, you have: Minnesota (ok maybe a stretch they just got Ponder), Cleveland, Washington, Jacksonville, Miami, Seattle, Arizona (probably not they spent way too much on Kolb), New York Jets, Oakland, Denver, Dallas, San Fran (ok another stretch considering how well Alex Smith did last year), and the Bears (Cutler and the Bears still suck). The possibility is high.