I don't think there is that much outrage in most places over UM's cheating and it is fading with time.
I disagree with the first part of this (I think most CFB fans that have been paying attention are outraged) but yes, it will fade with time as everything does.
There are 2 things at work here.
1. Do not upset the money train.
The NCAA doesn't directly benefit from Michigan football. They don't care if their money train gets upset. The Big Ten might care, but the outrage from within the Big Ten was exceptionally strong which I think outweighs any minor loss of value due to punishments.
2. Cost/benefit
The B1G confronted UM. UM did the automatic thing and threatened to sue. This then would get messy, long and expensive (see cost above).
The big 10 and UM then settle for a 3 game suspension for Harbaugh but he can coach at practice. Punishment, what punishment?
You left out some key details here.
Related to the recruting violations, Michigan offered up a four game suspension to the NCAA in exchange for them settling the case. The NCAA said no, so UM suspended Harbaugh for 3 cupcake games, hoping that they would "get credit" for these suspensions after punishments are handed down. Michigan got the NOA for this within the past few weeks, so this is very much still in play (including Level 1 violations).
Related to "Stalion-gate", the Big Ten handed down a three game suspension prior to the PSU game. UM immediately threatened to sue and get a TRO to keep JH on the field. They dropped this idea when they were told by the Big Ten and the NCAA: "We have way more evidence than we've made public, if you fight this, we'll impose more sanctions for THIS season." Michigan backed off in an attempt to keep their season dreams alive.
UM is conf. champ and nat'l champ in a year they got caught cheating. A penalty has to dissuade others from cheating. This probably encourages it. The potential benefit outweighs the cost.
Perhaps you are correct, but there are certainly penalties out there that would dissuade coaches from cheating (show cause, for example).