After all of the play-off/bowl games have been played, there is a 3-day job change period where current coaches can apply for other coaching jobs. During this time you can rescind up to 3 scholarships. It is advisable to only rescind scholarships that the SIM or another coach has signed.
After this 3 day job change period is over, then the season will roll over to the next, at which time your existing players will move up to the next year (freshman to soph, etc) and your seniors drop off your roster. And this is when the existing redshirt designations go away.
Yes, if you let the SIM fill one of your roster spots, you will not be able to carry any of your recruiting money over to the next season.