Absolutely the lines move a bit to reduce risk and get it a bit closer to 50%. But it will tend to not be moved to the point to get the game to 50/50 . As I said before the problem with College Basketball is you may have to move the line so much to get to this level, and then would be at the mercy of the sharps jumping you at the end.
Let me you ask this, what would you prefer as the house:
Setting reasonable lines that come in around 70-30, that you can move down slightly with some line movements. You are confident in your system that over time you will come out to at least 50/50 (and usually slightly more), and you will still collect your house cut.
Or
Trying to set college basketball lines at 50/50, which will create tremendous value for one team in certain instances. an crapping your pants at the last minute hoping the sharps don't push it to 52/48 for the team that is great value. That is a much worse scenario.
The 52/48 scenario in the latter example is much worse than taking a position in a game and moving it a few points to try to equalize it a bit.
I hear ya and I would say I'd take #1 but maybe not as much as 70/30. It's all about the dollar exposure. If they're too exposed then they'll jack the line up and run the risk of getting middled.
I'll give you a perfect example. This last season the sportsbooks got mauled with the NFL. Every week the public had certain teams they bet against with abandon - SF, LA and Cleveland. The books would set the line at 14 thinking it was appropriate and would draw some two-sided action. The public would bet the thing all the way up to 17 which as I'm sure you know is a huge move in the NFL. The books were not going to stand in the way of that and they let the line move up quite a bit. And yet they still got crushed.