Based on the background information we have on Sandusky, it seems likely that people could consider him somewhat strange. He also has a long history of helping and supporting children. With that as McQueary's opinion of him, his understanding of the 2002 incident could have actually been quite different. Consider that McQueary hears 2-3 "slapping noises" as he's entering the locker room, and then witnesses Sandusky in the shower with a 12 year old boy. He does not notice any distress from the child, he does not hear anything from either Sandusky or the child, and he does not witness any intercourse. At the time, he perceives the situation as uncomfortable, but not sexual. He calls his father and tells him what he witnessed, but again, his understanding of the situation is that it was strange and not necessarily sexual in nature. He then goes home to tell his father, as well as Dr. Dranov about the situation. I think that given Sandusky's history with helping children as well as his perception of being weird, the conclusion of it being sexual is a lot harder to come to. I propose that because of this ambiguity, this is why McQueary only contacted Paterno and not the police.
Based on some conversations within other FanPosts, I wanted to take a shot at assembling a possible explanation of events regarding the whole Sandusky situation. Please keep in mind that I am pro-Paterno, so while I've tried to keep this as objective as possible, I am still biased. Also, this is all speculation supported by the few facts that we have and some proven issues with our ability to remember things correctly. This is not an attempt to justify anyone's actions, merely an attempt to understand what may have actually happened.
McQueary meets with Paterno the next day and recounts the events of the previous evening. During this meeting, he tells Paterno he witnessed Sandusky in the showers with a 12 year old boy. Per his testimony, he admitted that he never claimed he saw "sodomy" or "anal intercourse" (which is irrelevant anyway since he testified that he didn't actually witness any sexual acts). This makes me believe that McQueary's portrayal of the incident was more about it being uncomfortable than sexual. Paterno testified that McQueary was visibly upset, which supports him being uncomfortable and weirded out. Paterno also testified that McQueary told him there was "fondling or something of a sexual nature" in his grand jury testimony. Given that McQueary acknowledges he didn't give Paterno specifics "out of respect", and McQueary also testified he never witnessed any fondling, I think it is safe that the fondling portion of Paterno's statement is incorrect and the reality of the conversation was that McQueary reported something "ambiguously strange or sexual in nature" (my words). The decision was then taken by Paterno to address the incident with Curley.
This is where the facts really become difficult to ascertain. We know that Paterno called Curley on Sunday evening and that they arranged a meeting with McQueary, Schultz and McQueary's father for the next week. Again, I believe that since the perspective was the incident was strange and not necessarily sexual, this is why there was no expediency in the issue. It was at the meeting with Schultz and Curley where McQueary recounted the events of that night. Per his testimony at the preliminary hearing as well as the testimony of his father, he did not use the terms "sodomy" or "anal intercourse" to Schultz or Curley either. Their grand jury testimony stated that McQueary told them of "horseplay". Given that no sexual terminology was used and the overall understanding of the incident was that it was disturbing but not sexual, I think this is where "horseplay" emerged as the description of the incident. Following this meeting, Schultz and Curley discussed the issue with Spanier, who supported the assertion that the event was "horseplay" and not sexual. They decided that banning Sandusky from bringing children onto campus would prevent any incidents like this from happening in the future. Under the perspective of the incident being strange and unusual, the banning of children on campus illustrates that it was not a punishment being administered, merely a prevention from a strange situation happening in the future. It was not meant as a punishment, and since at no point was it demonstrated that a child was in danger, there was no need to follow up with a police report even though McQueary testified that he thought Schultz was essentially the police.
The perspective of the incident being weird and uncomfortable also explains why McQueary would be satisfied with the steps taken and tell Paterno that he was ok when Paterno followed up with him several times throughout the year per McQueary's testimony.
Now, let us fast forward to 2008, when McQueary is contacted by investigators regarding Sandusky's alleged child abuse. Looking at the events of 2002 with a sexual perspective, McQueary recounts the events attributed to a sexual nature and no longer looks at them as uncomfortable and strange which he had previously considered them. It is a proven fact that memories change based on the circumstances we try to recall them. While McQueary is 100% certain that during those events he considered them sexual and not simply odd, it is very likely that he is remembering incorrectly. Through the sexual perspective he is now viewing the 2002 incident, he recounts basically the same story as what actually happened, but attributes the sexual nature that was not attributed in 2002. This supports why he never used any sexually specific descriptions but merely says "he conveyed that it was sexual in nature". This is also the reason why his father is capable of saying the same thing. Through the false memories of the conversations, they are attributing the sexual connotations that were lacking when the conversations actually took place which is what has led us into the situation we're in now. Also, based on the fact that Mcqueary was never instructed not to tell anyone of the incident and never instructed to not report it to police, it supports that there was no attempted cover-up, only a completely different understanding of the events.
This is just my attempt at taking a shot at the reality of what happened based on what little is known. I am not claiming this is absolute fact, but I think this reconstruction is much more likely to be what actually happened as opposed to the willful neglect and attempted cover-up that is alleged by many people outside of the university. Feel free to shoot holes through it or build on it with additional facts/logical reasoning.