It is all about covering-your-ass for both Penn State and the Paternos. Whatever will do the minimal damage will be the option for both.
Paterno’s legacy and Penn State’s reputation are at stake. The victims can go pound sand, as far as they are concerned. In fact, I am betting that both Penn State and Paterno will come out relatively unscathed. There is too much money, power, glory, and ego involved.
I cannot accept that you are correct. Penn State will be a pariah— a shunned and disrespected entity for decades. No-one will go there out of fear of being tainted. Even prisoners in penal institutions are killed by fellow inmates over the taint of child rape.There will be no unscathing. There will be no ESPN. They are finished if they do not cleanse the school of the memory of this horrible man, in my opinion.
The NCAA exists as an entity founded to circumvent the establishment of government bodies which together with much litigation would reign in college sports. If the public believes the NCAA can not or will not fulfill this function, then local courts will begin to step in and strip away the shield from litigation that has for decades shielded College sports from the bulk of entanglements with the court system.
A scandal of proportions big enough to threaten the NCAA’s semi autonomous position will cause it to act. Self preservation of the organization and its function as a shield from litigation and government regulation is going to trump Penn State's monetary contribution.
Maybe the courts and the NCAA won’t mess them up too badly, but they’re not going to live this down for a long time. People still remember Florida State as “Free Shoes U”, and that was almost twenty years ago. How long do you think people will be making “Ped State” jokes?