This is a horrible misconception (at best, and malicious lie at worst) which has persisted for a long time.
The bottom line is this: if you use the stretch provision, you still have to pay the player. If you trade them away, the other team pays the player.
At a time when the Kings had foregone league revenue sharing until the completion of the new arena, we were, shall we say, hurting for cash. Vlade had a plan for how to potentially use cap space. It didn't turn out to be a good plan, but it was a plan. The Kings could achieve the necessary cap space either by trading away players to a team with salary cap space to receive them, or by stretching them. The stretch option was far, far more expensive in terms of cash $$$, the one thing the Kings were hurting for at the time. Because they had foregone revenue sharing in order to get the league to agree not to move the franchise to Seattle, remember? So, strapped for cash, Vlade executed a trade instead, saving the team about $36M (in terms of today's salary cap, closer to $48M) and costing draft picks/swaps. Keep in mind, this is real money that was saved. Not just cap space. These are actual dollars that a cash-strapped franchise suddenly didn't need to take out of their own bank account to pay for players they didn't want. Cash they would have had to pay out if they had used the stretch provision.
So no, it's not remotely true that Vlade didn't know about the stretch provision. There was a concrete reason to execute a trade rather than use the stretch provision.
Note that this is entirely separate from the question of whether using that gained cap space to sign Rondo, Koufos, and Belinelli was a good idea. Clearly that did not work out in any way, shape, or form. Did Vlade make bad decisions in the free agent market? Yes. Was he so dumb that he didn't know about the stretch provision? No. He simply didn't use it - because, perhaps unlike some of his detractors, Vlade understood the team still had to pay players that were stretched.