Well firstly, Sandusky didn't continue working on his staff. He was already gone by that time.
Secondly, Paterno told McQueary to report it to the higher-ups, which McQueary did. Paterno's already been quoted as saying that he stopped McQueary before he was able to reveal all the details - for whatever reason - and asked McQueary to report it to the higher-ups.
You seem to be deliberately ignoring and misconstruing portions of the grand jury presentments to suit your argument. Simply saying Sandusky was "gone" conveniently leaves out the fact that he held an office and was a regular presence on campus up until the day he was arrested. How do you so easily dismiss the very real possibliity that Paterno may be covering his ass here? It makes me wonder what your end game is. You're really stretching the truth, if not being flat out dishonest, in order to excuse his behavior. According to the grand jury, McQuery told Paterno the full details, i.e. he saw Sandusky having anal sex with a young boy.
Now here's my version of the conspiracy theory (emphasis on
theory - not claiming this to be either probable or factual):
If Paterno in fact tried to cut off McQuery before getting the full details, it's arguably the most damning piece of evidence implicating him in a cover-up. It would at least make it abundantly obvious that he was trying to maintain plausible deniability should the allegations ever become public.
Paterno never told McQuery to report the story to higher-ups, in fact he had reason not to - he wanted control over the story. If Paterno did tell him to go up the chain on his own, please give the source of this information. It isn't in the grand jury presentment. I don't recall reading that Paterno told McQuery to do anything at all.
Paterno gave his own version of McQuery's alleged full account to Curley and Schultz a day later, "fulfilling his legal obligation". It may have been an inaccurate and/or ambiguous representation, but it was not false. Again it gives the appearance that he was controlling the message as he separated himself away from the situation.
McQuery was not asked about the rape again until he was called to a meeting with Curley and Schultz a WEEK AND A HALF later. Paterno was not present. Since Paterno had already given Curley and Schultz a watered down report, they could theoretically claim that the details of McQuery's version of events conflicted Paterno's to the point that it was no longer credible. Or that they became so intertwined they could no longer separate one from the other. Either way, it gives a reason, however weak that reason may be, to not go to the authorities.
They bring their version of the story , which at this point has become so intentionally diluted and convoluted, to Spanier who could reasonably claim that he had no reason to act on it. Yet he approves the decision to ask Sandusky to stop bringing children to the football facility... seems he must have known of at least one or more prior incidents and was worried Sandusky was getting too brazen.
So that leaves Paterno as the only guy who could really play either side of the fence depending on how the story leaked out. He could claim that he passed along the full version of events and McQuery would support that assertion. He could also claim that he received a less serious version, and those further up the chain would back him.
Once it became clear that McQuery had been flipped by the state investigators, Paterno had no choice but to go with the downplayed version. The scheme fell apart when Curley and Schultz couldn't get their stories straight. They both played it down, but did it in completely different ways, ruining their credibility and casting serious doubt on Paterno in the process.
Since Curley, Schultz and Spanier would not have heard each other's testimony, they may have thought that they had all stuck to the same story, giving them less too worry about. When the presententments were made public, they realized someone fucked up and started freaking out, thus the total mismanagement of the situation in the days immediately following.
This all seemed batshit crazy to me a week ago. But I'm now having a pretty hard time totally dismissing the possibility that Joe Paterno was the Keyser Söze of PSU. If anything more than pure speculation starts coming out indicating that the 1998 investigation was compromised, I think the consider conspiracy theory gains some real legitimacy.