I no expert on Stanford, but I'll tell you what I know.
It is a very good Thomas/Bell and/or Bell/Thomas course that has had some lofty "rankings" in the past. I give it 1*-2** (depending on my mood).
Stanford is owned by the University, but also operates as a private club, which co-exists with students, faculty members, etc. who can play the course, at ridiculously low rates (I paid $1.50/round in the mid-late 60's).
The 1990's controversy involved (I think) actually bulldozing holes 1-7 (all that to the East of Junipero Serra) for other University purposes (faculty housing, etc.). Stanford has ample land up in the foothills adjacent to the 17th-18th holes to add on a new 7 holes as was planned (of course, that land is a bit environmentally sensistive, so who knows what might happen to that scheme!). It took a concerted PR campaign from "Friends of Stanford Golf" invoking the help of alumni such as Grant Spaeth, Sandy Tatum, Tom Watson, Ken Bakst and Tiger Woods, to scupper that potential desecration.
Holes 1-7 include 2 of the very best holes on the course (and in Northern California) 2 and 6. In fact, the Stanford I played when I was a student had one of the best front nines in all of golf. As I have posted before, holes 4,5 and 8 were changed in the late 60's-early 70's by RTJ, the latter for who knows why (basically changing a nice simple Thomas green on a short "par" 3 for a buried elephant one). The 4-5 alterations were done in anticipation of the expansion of an adjoining road and resulted in:
--the substitution of an awkward short 4 whcih involves hitting a 1-3 iron short of a barranca and then pitching onto another RTJ sort of green for Thomas/Bell's fine medium length "par" 4 requiring driver into a valley and then a semi-blind shot up the hill to a great two tiered green.
--moving the tee on the next hole (#5, for those of you who are numerically challenged...) down on the flat. The old 5 tee was 50 feet up and 50 yards back, next to the old green. It required a long and straight shot to carry the ridge which was 220-230 yards away. Now you can hit 1-3 iron over the ridge. Not what Thomas/Bell meant, not what they meant at all......
Getting back to Dan's original question, I see no reason why any University shouldn't have a golf course (just as they have tennis courts, bowling alleys, softball fields, weight rooms, swimming pools, etc. The problem with many schools is the lack of available land (or, in the case of Stanford, the fact that the land on which the golf course sits is the best land that the University owns for accomodating future expansion of other needs (as mentioned above). If you have the land, and the net cost to the University is in line with alternative uses, why not?
But.....this is idealistic, and the use of 100+ acres for a rich person's sport may be continually difficult to defend within many of the groves of academe. I personally will be surprised if Stanford Golf Course survives in present form for more than another 20-30 years. Sad, but true.
PS to Tim Weiman--I am not yet bi-polar enough to be considered a (sic) alumni. All diagnostic tools available to modern psychiatry (and all extant Latin grammars) still classify me as an alumnus.......(insert smiley face here).