This makes sense to me, on one point. If you want to be a private group and exclude members by whatever criteria you want, then don’t expect government funding. With government funding comes many strings attached. Accept funding, lose your right to an exclusive membership.
Although, as long as they fund themselves, I think they should be a university recognized organization!
Right, and you're not alone in your position as witnessed by numerous posts on this thread. BUT, the only "funding" given to this group by the university is the classroom/facility that they were allowed to meet in as well as the perks that come along with being formally recognized by the university. Without that recognition, these students could not use the campus to meet, nor could they use university communication systems to post information about their club.
Essentially, the Court is saying if you're a group who wants to meet on campus, then you have to abide by the university non-discrimination policy. The "funding" is really a red herring.