Everybody takes kids that are not otherwise "fit" for the rest of the University. And by everyone I mean including the Patriot League, the Ivy League and NESCAC. The question isn't if they will lower their normal academic standards -- the question is by how much.
What Upstater really means is: "Nobody is as academically pure as Penn State, Penn State does it the right way, every day".
I went to a school that was essentially a southern version of the NESCAC. We did exactly as you said and the school ended up being better off for it. The whole "Academic Snobbery" aspect ticks me off a little. You either qualify or you don't.
I remember in High School I had classmates that couldn't score well on the SAT to save their lives. Their parents spent big money on Princeton Review and manufacturing "learning disabilities" to take untimed SATs. These are the inside tricks of the straight teeth and SUV crowd. Not every kid gets every advantage and "special consideration" like that.
Also, had a classmate who was a freakishly good at squashl, but if you looked at his grades and his SATs you might think he was dumber than a surf board (he wasn't). Well, a certain Ivy League school snapped him up and didn't think twice. If his skin were a different color, some people might say that he was "unift for the rest of the U" however since it wasn't he just "hasn't peaked yet academicall". Everybody will make exceptions when it comes to something important to them.