To the best of my knowledge, UVa does not separate itself from federal funds in the manner described above. So, in a manner of speaking, they are a "state" school, subject to interference in what should be private, internal decisions like the old diner sign..."We reserve the right to refuse service to anyone."
Basically, my position on this tends toward the libertarian (note the small "l") but this whole thing is cluttered with the entanglements I have described. If the school doesn't want me as a white male with stellar scores and class standing, I expect the marketplace holds schools that are open to what I could bring to the campus.
It's ironic that the people who are benefitting from this see it as perfectly ethical. There's no denying that if this school's policies favored white students instead, Jesse Jackson and other "black leaders" would be screaming bloody murder and the school's standing as a public or private school would not matter to them in the slightest. They would be suing four ways to Sunday, probably on the basis of "civil rights".