Peyton had C3,C4, and C5 vertebra fused together, which is 'common' surgical solution to pinched nerves caused by deteriorated or damaged neck bones. These vertebra are also the main escape rout for spinal nerves that serve the lungs. Peyton's 'neck thingy' was no joke.
His doctor's were never concerned about him being paralyzed, he has the same chance of being paralyzed as any other QB in the league and he's said it multiple times in interviews. It was always a question of whether the nerves would regenerate enough for him to be able to throw effectively.