I think it's a matter of degrees. Should a GM refuse to trade an asset to Team A offers a deal that is 50 percent (as if you can measure that) better than Team B, because Team A is in the division? I'm with you and others -- that would be a dumb decision by the GM.
But what if it was only 40 percent better? 30 percent? 10 percent? 1 percent? There may be a number where it makes sense to consider the division component. I don't know what that number is, but no GM is going to publish it.
So I think it's plausible that the Sox asked for more from the Twins for Fedde than they asked from teams outside the division. But I haven't seen anyone reference the corollary, which is that it's also plausible that the Twins would offer less to the White Sox than they would to a team outside the division, for fear of having the prospect bite them more frequently in future years. And again, that's a matter of degrees, but given that the Twins would be offering young, controllable talent, it's frankly a bigger issue for the Twins than it is for the Sox. The Twins could get bit for six years (or 12 or more if it's multiple prospects), whereas the White Sox only have to worry about one more year on Fedde.
In Falvey's case (and any GM, for that matter), he's going to name that the other team was asking too much because they were in the division, but he's not going to highlight that they would only offer less for the same reason.