There's too much talent on his team to simply throw them into the draft pool, although I agree that contraction makes the most sense.
Honestly, the easiest way to handle it would be to give the couple new owners who we've recruited this year something like 2-3 picks each among KB's team, and then just let everyone else go into the FA pool to be picked by anyone. We could do that instead of our option to let the new teams get their other pre-draft FA choices, and then we don't have to worry as much about what's fair among the rest of the teams, and having Montana end up winning the lotto and getting another stud player.
Or if that's too much to give the new teams, I'd suggest giving them the 1-2 picks in a dispersal draft, and then probably just doing a random draw for everyone else. 1 round of draft is probably enough to get the real valuable talents out.
They own all their own picks (and Montana's 2nd, so sadly enough, Montana is the only person to I guess have benefitted from a deal from KB recently), so no issue just skipping over them in the actual draft.