The answer to your first question is "Probably not". I don't think they ever envisioned this kind of situation when that was written. I think they were thinking about "lying to recruits" level of activities. Not serious criminal behavior.
"These values should be manifest not only in athletics participation, but also in the broad spectrum of activities affecting the athletics program."
Where is the line that demarcates the "activities affecting the athletics program?" What would you suggest? What sort of thing is clearly in? Clearly out?
Would it include Pitino bending that woman over that bar table for a little extra-martial hanky-panky?
Do you really want the NCAA to start making these kinds of decisions, conducting investigations, parceling out punishments? I'd say they were absolutely unprepared to do any of it.
People right now in a fit of righteous outrage seem to be looking for a way to punish Penn State. They have grasp upon the NCAA as a possible instrument. Bad idea. Bad precedent.
With regard to the question of jurisdiction, we disagree. I wish I had the time to dig a little and discover the "legislative intent" of the Bylaws concerning ethical conduct, because I am curious about when those Bylaws were enacted, and why. It could easily be the case that they were meant to address scenarios like you suggest, e.g. lying to recruits. But, I think that the "broad spectrum" clause actually does pull in more than lying to recruits, and if lying to recruits is verboten, then the actions at PSU are also covered. I take an expansive view of the scope, from a plain reading of the text.
So the issue with Pitino and his hanky-panky is in fact covered, I believe. I think the Bylaws establish a very broad scope of jurisdiction for ethical conduct in general, but the NCAA has chosen not to enforce it in most (all?) cases until now. I don't know if anyone at the NCAA thinks of it in these legal-ese terms, but what I see is a power that can be exercised in an awful lot of cases, while precedent has shown that the power will not be exercised unless the offense is grave. So choosing to enforce it here does not imperil the lesser evils, because the NCAA has already shown that they won't pursue those. The NCAA isn't awakening to a new-found power; they are saying, "It's time to dust off that big cannon for this situation."
I don't have an off-hand suggestion for a bright line standard about what constitutes "activities affecting the athletics program." The word "affecting" opens up a can of worms, as seen by the history of the Interstate Commerce clause in the US Constitution, though. I think weight should be given to activities at the institutional level, versus activities performed by single actors lower in the hierarchy of authority. But it's a pretty broad brush. At least SCOTUS said, "Substantial effect." The NCAA just says "affecting." However, I don't think we need to worry about finding that bright line. The NCAA has shown that it isn't interested in finagling at the boundary.
