If the Green Jersey points system hadn't changed last year, Cav would still be going for green this year - by winning as many stages as possible. However, with the greater emphasis on the intermediate sprints, the team will have to work a lot more even on days that won't end up in a sprint finish (including mountainous days). It seems there's now a realisation that this might conflict with trying to win yellow.
The reason Sky are in cycling (apart from the publicity) is to get bums on saddles in the UK. There's no doubt that a gold medal for Cav would inspire more people than another Green Jersey. Whereas a yellow jersey is probably even better than an Olympic medal. Cav's always been very business-like about cycling, often saying that it's his job to get exposure for the team sponsors therefore he shouldn't have any issue with the above and he can still go for stage wins.
Team Sky was setup in conjunction with British Cycling specifically to help British road riders manage their programmes to suit the Olympics. It's not fortunate that Geraint Thomas is doing just that, it's planned.