The suit was originally filed by the players in 1997 against the league, which owns all player contracts.
The league, which owns all player contracts, is expected to make an announcement later in the week.
Petke earned about $30,000 this past season for the MetroStars in a league that owns all player contracts.
The $2 million price tag is the highest paid for a player by the league, which owns all player contracts.
Diallo is under contract to M.L.S., which owns all player contracts, through the 2003 season.
(The league owns all player contracts and assigns players to each club.)
But the league, which owns all player contracts, opted to retain Joseph, 28, who has two years remaining on a contract that pays $150,000 a year.
The average salary in the league, which owns all player contracts, is about $45,000.
M.L.S., which still owns all player contracts under its single-entity system, will pay the first $400,000 in salary; the rest is up to the club.
Since the league owns all player contracts, each team must operate under a salary cap of about $300,000.