Home basketball games are never going to be played at Rec Hall excepting for an OOC game during Christmas break once every year or three. Forget moving home games to Rec Hall, expanding Rec Hall, or building a new basketball arena. Not feasible for several reasons in each case.
The practical solution is some retrofitting of the BJC to make it a better basketball venue. The BJC was designed about 3,000 seats too big, but no seating is going to be torn out.
However, you could build 8-10 rows of custom-designed temporary bleachers behind the baskets for student seating/standing, probably allocated to freshmen and sophomores, and then tape off the sight-line-blocked permanent seats behind them. That would bring the students much closer to the action and create more intimacy, which the BJC sorely lacks.
I just don't see how you're ever get more than 10,000 fans for a midweek game in the best of circumstances. B1G games on the weekends should be sellouts, which, if PSU did as suggested in the above paragraph, would mean about a 13,000-seat capacity.
It's going to take several consecutive seasons like the present one to create a basketball fandom in State College. The Centre Region and Pennsylvania generally, excepting Philly and its suburbs, are simply not basketball hotbeds.
How many of your alumni friends follow NCAA or NBA basketball closely? Very few, I'd venture.