When the first alegations came out he was an indispensible coach to them and closely connected to JoePa. They pushed it all aside.
In 1998 they couldn't ignore it and had him "retire".
In 2002 they had to cover it up because they covered it up in 1998. Also, JoePa was getting heat at that time for some poor seasons and he wasn't ready to retire. If they took their chances and outed Sandusky in 2002 it might have led them to be forced to make JoePa retire.
The only way they could have expeosed him and limited their damage was to out him after the first alegations. Instead they started the vicious cycle of cover ups.
The 1998 allegations were investigated by campus police and ultimately no charges were filed, so they could have claimed the high road on that if they had chosen to go ahead and out Sandusky in 2002.