This is a more difficult issue for me.
I grant that univeristy law schools and their parent institutions do not have to take federal moneys to support reasearch or develop academic programs to support federal initiatives such as homeland security. Assume that Harvard, Stanford, or Illinois decides not to accept federal grants because of a strong belief in academic freedom and the First Amendment, who is hurt?
Undoubtedly, the university, their professors and grad students will be hurt by the evaporation of federal funds. Equally damaged will be federal programs and intiatives. Why? The quality of research at NoName State Community College is and will not for a generation or two match the expertise of MIT, Michigan, or Penn. The government, therefore, will be funding third-rate research; the consequences would likely to be a waste of research dollars which fund programs that cannot deliver and a severe contraction in the technological expertise of the U.S.
Do I believe any major university would give up federal money? No way! But legislating a polarized view on a social problem is not the solution. Perhaps, the court has no way but to support the government's case; however, I think it is time that the President/Congress revisit the issue of discrimmination in the military. Some in the military command structure may have been asleep for the past 30 years or so. The Air Force Academy is one that has not got it right in terms of Evangelican Christian wing-nuts denigerating Jewish, Catholic, and moderate Protestants or the date rape of fellow cadets.
A good starting point might be the adoption of the EU's stated position on religious, sexual, and racial discrimination. Essentially, the position is zero tolerance.
jay