Apparently Pete Carroll doesn't have much belief in him as a runner but he is relied upon as a blocker and extra 3rd down receiver. As another poster pointed out, with the number of roster moves Seattle made... They could have simply cut him if they felt he was washed up. There is no real fan base in Seattle who would question them. And Russell Wilson did not have to say that much about him... Fred hasn't been known for much this year besides crashing his car. So if they think he can still contribute - their record gives them more credibility than the Bills staff.
Having said that although I hated the cut, Fred would not have made any real difference in Buffalo this year. He doesn't play D, for one thing.