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The original "justification" that Joe Paterno and people in power at PSU, did not turn in Sandusky because they were "protecting the PSU brand" made zero sense. If Sandusky was the problem, you removed him after turning him in, and looked like heroes.
That Sandusky was the head of a rotting fish, where it was in the interest of many for him to not be arrested makes more sense, as sick as it sounds.
I agree with your first point.
Your second point may be true--and I've been alluding constantly to total weirdness from the UP Campus Police, DAs investigation on up to the AG investigation.
On the other hand, it could all still be because, one, Paterno downplayed the gravity of the offense because of his old guard ways, and two, people were afraid to cross Paterno.
There are three different explanation:
1. Protecting PSU
2. A bigger story involving local elites including law enforcement
3. Paterno's blind eye