Does it makes sense?

Collison isn't a top tier point guard by any means, but he's a serviceable point guard who can be signed for significantly less than what Isaiah is expected to retrieve in free agency. Having Collison locked up also allows the Kings to work on sign-and-trade deals with Isaiah's suitors without needing a point guard in return.

Why it doesn't make sense

Simply put, Isaiah is a better point guard than Collison. A lot better. The Kings can match any offer, and we don't even know what kind of offer Isaiah will actually get.

Likelihood this happens?

I'd personally expect this rumor to come to fruition. We've long expected that the Kings don't want to exceed a certain unknown dollar figure for Isaiah. Locking up a replacement ensures that the Kings don't lose out on replacement options while waiting to see what Isaiah gets offered.