Grove City College went a bit farther. They insisted that they have the right to use religion in admissions decisions.
However, I'm probably not only not explaining it correctly or completely, I probably don't understand it completely either. :)
Grove City didn't deal with whether or not the school could use religious requirements in admission, it dealt with conditioning the school's receipt of financial aid (by way of students receiving federal grants) on compliance with Title IX provisions.
The Court ruled the federal gov't could place this sort of condition w/out violating the 1st Amendment rights of the students or the school.