Lots of interesting reactions in this thread. Here's my take this morning.
First, unless Sandusky's actions were somehow connected to the operation of the team, I don't see how the NCAA comes down on Penn State and gives them any sort of penalty for this. My guess is that the biggest threat to Penn State is from the legal proceedings and the destruction of an image of wholesomeness that has been created over five decades.
Second, the story we read yesterday has so many unanswered questions that I don't think we can fully judge Paterno. Specifically, the story I read this morning was careful not to say what Paterno did other than going to the AD with the allegations - we may learn that he did follow up, or he may have done nothing. However, it's worth remembering that Paterno himself served as AD for a long time, so he knew exactly what the ADs responsibilities were in this case.
The last point I want to make is about the strange behavior of the University President in defending the Athletic Director and the Sr. VP for Finance and Business, who are both charged with failure to notify authorities and perjury. (The Sr. VP was in charge of the campus police, who allegedly tried to cover up the situation.) Here's the quote I talked about yesterday from the President:
"I have known and worked daily with Tim and Gary for more than 16 years," Mr. Spanier said. "I have complete confidence in how they have handled the allegations about a former university employee."
It is notable that the President - Graham B. Spanier - was also named in the Grand Jury report as someone who knew about the 2002 incident, which adds another layer of complexity. And quite honestly, it makes me believe that they were acting at his behest, because I can't imagine not reporting something like this when the allegations are known at the highest levels of the University ... unless they were directed by the man at the top.
At the conclusion of things, I don't see how this doesn't hurt Paterno badly. Because the best case scenario for him still involves discovering that one of his closest friends and associates was a monster. And the worst case is that he shares responsibility in the cover up, which will destroy his legacy. As for the rest of the university, given his knowledge of the incident at the time it was reported. I don't see how the President survives this.
Sounds to me like Happy Valley will not be living up to it's name in the coming months.
Edit: And now I see this morning that half of the crimes that Sandusky is charged with did occur during the time he was on staff at Penn State, which makes things significantly uglier for the University and Paterno.