they could use him as Putin's replacement and in this way trick people into another 'reset'.
If you thought Putin and Navalny would have done a swap, you are perhaps a bit too cynical about the state of politics in Russia.
No, Navalny was a genuine threat.
When he was rising, it was done in the shadow of the old guard of oppositionairies - guys like Nemtsov, Kasyanov, Yavlinsky, Kasparov...
Those guys were truly a "managed opposition", and everyone understood it. Then Nemtsov was killed, and the rest scattered around the globe.
Navalny filled up the vacuum. He cemented his name when he returned to Russia after waking from his coma in Germany. This immediately earned the respect of many Russians.
Navalny was not a bystander like the other guys, but a passenger inside our car.