If I release a guy now that has a mutual option next year, will I still be responsible for his option year?

I believe the 25% buyout is automatically triggered for next season if you release him.

it appears you are right...

All this because I made a trade for a key player, then negotiated some new long term contracts, which in turn bumped my next season salary over the 80% limit before the trade completed.  The only option I had was to release the only guy on my team with a mutual option next season to clear up the salary.  It worked, but I just missed out on getting some value for him next season when I would have rejected his option and let him go to FA.

What value would you have received from him by declining his option next season?

if he is a Type A or B, wouldn't I get something back in terms of draft picks or am I mistaken?

You don't get compensation if you decline an option.  Only if the player does.

well then I lost out on nothing! That was the only thing that was making me annoyed.  Thanks for clarifying that.