You have to sign enough mid-level players to contracts. And some of your draft picks are going to be those players. Thomas had his best season after his contract was signed, he was victimized by injuries. Peat absolutely wasn't a bust. He was a versatile player who could step in where needed and you need players like him. He wasn't an All-Pro and was never paid like one. Latt dealt with injuries, had nothing to do with fall off.
And no, you can't pick up players at better prices. If anything, they cost more. You can't and won't keep everyone and not everyone you bring in from other teams are going to be cheap. Other teams are going to be competing for their services.
Sometimes it's cheaper to extend a contract than bring in another player who does the same thing. And a lot of the decision making rests with the vision of the GM because he can see the full picture.
I've long been a fan of Loomis but I think it's time for a fresh set of eyes at the GM position. But no GM in the NFL does what you're suggesting, and with good reason.