If I held a party at my house and didn't want to invite you because you called my dog a 'mutt', you'd get laughed out of court if you tried to sue me over it.
People should be allowed to organize under whatever principles they want to organize under. Disallowing Harvard to use whatever criteria they want to use to admit students, unless of course they breach civil rights laws, is ultimately decreasing the amount of intellectual diversity in the world.
People that don't like Harvard can apply to any other college. There's no shortage of them to choose from. But if you tell Harvard what they can and can't do, you run the risk of destroying the individuality of Harvard.
Also, there's some mumbling about the fact that it was private speech that was supposedly surveilled on. Obviously it wasn't that private if school administrators caught wind of it. If you really want a private group, keep it truly private and don't tell anyone about it.
The lesson kids should be taking away from this is, don't let your friends drag you into dangerous situations. Harvard is a nationally recognized school, any screw-ups earn national attention. It's very much a "if you can't stand the heat, get out of the kitchen" sort of situation.