One could envision a scenario where they negotiate his buy-out downward in exchange for letting KO resign in dignity and the university keeping his alleged embarrassing misdeeds quiet.
You're not thinking this through at all.
KO knows that the university has next to no chance of going public with that due to the mountains of bad publicity it would bring to the program and entire administration. AD Dave's career would be in serious jeopardy if it came out that he knew about all of this and postponed taking disciplinary action until team performance began to suffer...the fact that the university let this slide and continue happening over an extended period of time would not be received well either.
This isn't even considering how many figures in the media bear a grudge against UConn, and would eagerly give this story legs/keep it in circulation long enough to render it a serious hit to the brand. ESPN in particular is stocked with Newhouse grads who would love to kick UConn when it's down.
With that in mind, your proposal doesn't make any sense. If you're telling me you honestly believe that KO is the only one who will look bad if the university goes public, I have no choice but to assume that some sort of emotional displeasure with the team's play is creating a bias in your thought process.