The Solomon Amendment & Religious Liberty on Campus

A few days ago Rick reported on the federal district court ruling allowing Hastings Law School to bar the Christian Legal Society from using law school resources given the group's discrimination based on religion and sexual orientation.  The law school's lawyer put the cause in stark terms, arguing that the school's position is that discriminating groups "have no place on campus."  (HT: Joe Knippenberg)  What's noteworthy is that the district court had an additional tool by which to dispose of CLS's claims: Rumsfeld v. Fair (the Solomon Amendment case).  The court reasoned:

As in Rumsfeld, the Court finds that the [Hastings] Nondiscrimination Policy regulates conduct, not speech because it affects what CLS must do if it wants to become a registered student organization – not engage in discrimination – not what CLS may or may not say regarding its beliefs on nonorthodox Christianity or homosexuality.

I've gone on record previously noting the tension between the government's position in Fair and the principle of subsidiarity.  Is this new ruling evidence that Fair will have far-reaching consequences for subsidiarity whenever public funding is involved, or did the district court judge (a Bush appointee, notably) simply stretch Fair beyond its reasonable bounds?

Rob