I don't think the chairman is an idiot, £1.4 million for a League Two player is quite a bit.
The reality is that until you get to the Premier League (maybe the Championship, but players love to complain about new contracts constantly at that level), you're a selling club to compensate for the expenses of running the club (in your case, the youth setup). Think of the money as funding future youth that will likely be worth more than that.
As far the friendly clause, you have to compare it to the fee Stoke would charge to play at your stadium (guessing about £15k or so). It's still worthwhile because the typical player sale will go to higher reputation clubs in higher reputation leagues, and sometimes the buying team wouldn't otherwise accept a friendly at your stadium so it's a chance to play higher-level competition.