So was Schilling's. It was, quite frankly, bloody obvious that you would at least have to be very careful of Schilling's shoulder even if he did pitch in '08. We were all talking about pitch and innings limits even before we learned the worst.
What the FO knew on Schilling was that he was at risk of what actually happened -- career-ending shoulder surgery. He made it through his final 2007 playoffs on the three C's -- Command, Courage, and Cortisone. They couldn't have NOT known. They couldn't have even not known the magnitude of the risk, considering that Schilling was i teetering on the edge of a significant shoulder injury for pretty much the entire 2007 season.
Read 38 pitches. The physical didn't turn in a clean bill of health. What it turned in was a thought that they might be able to coax one last year out of Schilling's battered ligaments. Much like an inspected car doesn't mean a perfect car, just one that's not likely to fall apart on you within the next 15 minutes unless you do something really stupid.