Yes that happened - but that was after we had triggered the clause, and after Suarez had publicly complained that his contract was not being honoured. Suarez was not a happy chappy initially, he was keen to come (at least he was at the time when we triggered the clause - may well have ended up staying after talking to Gerrard etc, as you say).
Your owner Henry confirmed this himself - he said that they just said no, even though they technically weren't allowed to. It was in an interview in the US, will be online somewhere.
Reason why it went away quietly is because Suarez was given a shiny big contract, some kind of promise that they wouldn't burn him next time his release clause is triggered, and Arsenal never kicked up a fuss.
Ignoring my club for a second, I actually thought this was really awesome. The owners just said enough's enough, we don't want you going anywhere, for any price. Having been burned by Arsenal players regularly leaving, I admired the approach.
Problem is they shouldn't have given him a release clause then - that was pretty dishonest really. And Henry's smoking comment, deriding Arsenal, was pretty stupid and uncalled for. All we did was trigger the clause that they put in his contract, in the exact way that you are supposed to in those situations. Just showed a lack of understanding of footballing contracts to be fair, I suppose he would have been used to the way american sports contract their athletes, which is quite a bit different.