Harbaugh is just milking it to get a new contract at Michigan. Heard (on the radio) that he was asking for a clause where he can't be fired for NCAA violations and to be the highest paid coach.
I disagree that he is "just milking it." He won the title at Michigan this year, the culmination of a steady build of Michigan from also ran into national power again. Meanwhile, he was suspended this year for stupid NCAA BS and then again for the sign stealing, which is something not unique to Michigan and about which the NCAA admitted they had no proof of Harbaugh having knowledge or involvement. I expect the combination of these things makes this an excellent time for Harbaugh to jump back to the NFL.
He hired an NFL agent. He has already had multiple in person NFL interviews. I'm not saying he will definitely jump to the NFL, but I think he is at least very seriously considering it.
As for asking for the Michigan contract clause:

. To the extent he will consider returning to Michigan on a multi-year contract, passing up multiple NFL opportunities, he doesn't want to do that only to get fired in the middle of next season due to more NCAA/B1G fallout. Seems perfectly reasonable IMO.
And along those same lines, the Chargers only have an interest in coaches they can get on the cheap. Harbaugh's interview is just to appease the fans into making them think they are taking this HC hunt seriously. I doubt they even talked numbers.
This has seemingly been true in the past, but I believe what John Spanos has been quoted as saying about this for the current search. The Chargers still have a chance to become a franchise that will gain some traction in the LA market. They will lose that chance if they blow another head coach hire by cheaping out again.
I think Harbaugh will be the hire. If he isn't, I think the hire could very well be Vrabel or Ben Johnson. None of those guys are coming cheap. If they instead hire another weak coordinator, like Aaron Glenn, for example, they will turn away a good portion of the small remaining fan base. I think they know that and want to avoid it.