As others have said, I don't think there is any conflict between signing Iloka and signing Thomas.
Personally, I'd be very excited about Iloka because I feel like he's just about the perfect type of SS for this scheme. He is older but is amazingly durable (0 missed games in 5 years I think?), and box safeties tend to age well because there's not as much speed involved. I'd honestly consider signing him to a 2 or 3 year deal to be a starter for a couple years while we find an impact player.
ET is a pure FS, while Iloka is a pure SS, so there would be no competition between them for jobs. I still think the FO wants Earl Thomas here, and Earl Thomas wants to play for us, but Seattle's asking price seems to be the stopping point in negotiations. And to the FO's credit, they're playing hardball with Seattle and aren't willing to trade for ET at a price they don't think is fair. I think there's like a 70% chance that ET someday ends up wearing the Star, it's just a matter of when and what we give up for him.
I would expect to see something happen on the trade deadline - if Seattle's season goes down the tubes like a lot of pundits are saying, and you can bet that Thomas isn't going to resign with them, they will be looking to dump him on the cheap while they can still get something for him.