Evidently I draw a different moral from this story than you do. Consider this quote:
The courageous student refused any settlement, and with the local ACLU recruited witnesses and professors to defend him. Ethnicity professors testified that they have never heard "water buffalo" ever used in a racist light, and they ridiculed the college's stance looking at the fact that the water buffalo isn't even African. The press got wind of the deal, and First Amendment advocates brought out numerous cases of double standards of the administrapo.
What I get from this passage is that reasonable people overwhelmingly reject abuses of the system like the one described here. Yes, it's a crock that it even had to go to a courtroom; there are a lot of lawsuits these days that are a crock, and many of them have nothing to do with political correctness. Yes, there are tinpot dictators in academe; there are tinpot dictators in government and private enterprise too.

If you ask me, this sort of yellow journalism is far more harmful than any number of boneheaded college administrators, and far more prevalent as well. Right wingers want us to believe that decent, hard working students are being ceaselessly persecuted in our universities. Left wingers want us to believe that miscreants in black trenchcoats are raking our schools with machinegun fire every day, and everyone will warn you that rapists and muggers and thieves (oh, my!) lurk in every shadow.

Don't believe a word of it. Shit happens; I won't kid you on that point, but it doesn't happen nearly as often as you might think. More importantly, as we've seen here, when it does happen, decent people band together to fight it, and they usually win. This sort of FUD sells books and newspapers, and it brings in television ratings, but it seldom bears any resemblance to reality.