if a donor's kid get accepted in exchange for $10 mln donation - that funds 20 scholarships to underrepresented students - is it a good policy or not??? would you rather have no legacy admits and ZERO scholarships whatsoever ? or would you prefer to have some number of legacies + scholarships and new buildings funded from their donations ???

Zero legacies. If the university is suppised to produce good students ir shouldnt be that 1 student in 21 is a complete dud. Because that's how it works, they are duds, who cant be kicked out and they will get their diploma even if they cant read. In theory (not reality) those who finish top universities should be top people. To tell it other way: would you be happy if 1 car in 21 didn drive? Or 1 apple in 21 was poisonous The top universities have long watered down their achivements anyway. Most is just pure nepotism.

You're completely missing the point of private universities. The value proposition isn't in a better education: they offer a marginally, if it all, better education than equivalent tier public schools. What they offer is connections. Those rich kids whose parents bribed their way in? Extremely valuable connection to make. That's why private universities do the whole "eye-watering ticket price, but most students have some level of merit-based scholarship" setup. Mingling the talented and the well-connected is an extremely valuable proposition for everybody involved. If you're looking for a school made of exclusively meritocratic gifted scholars, that's what elite public schools like Cal are for. But if you want a school that creates the most opportunities for success, private schools are where that's at.