"We remain interested in David Dunn," Williams has said.
"We are unique in the Premiership as a small-town club and I think having a local lad in the side would add value.
"You cannot say having a local boy returning would increase attendances but I think the fans would value having him at Rovers.
"The question now is if we feel we want to match Birmingham's valuation. Otherwise, we will have to pass."
Dunn moved to St Andrew's from Rovers for a £5.5million fee in 2003 but has struggled with injuries over that period which has restricted him into making just 53 starts for Blues in three-and-a-half seasons.