"thousands of walk-on athletes 'work' for a school but don't get paid. I did. I was just glad to be on a team."
That's how it works. You pay for some better athletes to get your school recognition and then slower people come because of that. A coach who has a fast team might just be an assembler of talent but people will still come because they think he can work magic.
"School spirit is a fair answer and a good one - although really...it is teaching a rough lesson - that sports is how to measure a school's worthiness."
It may not be want everyone wants to hear but that's the way it is. I know of a few D2 schools who ignored their athletic departments for a long time and enrollment dropped below 500 students because high schoolers didn't even know the place existed. It's not really about measuring the worth of a school by its athletics. The sports teams are ambassadors of that school. When my team goes to a cross country meet half way across the country and we all walk into a restaurant with our team jackets on, that's advertising for the school. When the quarterback is on the cover of Sports Illustrated wearing the schools uniform, that is a huge amount of advertising and pretty much pays for him being there.
"what is 'walk on money?' virtually every school in the country has a selective admissions policy - the freshman class will be the same size with or without a few extra people on a d2 xc team."
Bigger, more prestigious schools are going to be selective. But there are a lot of small no name schools who are desperate for more freshmen to come in. A few extra people on the xc team won't make a huge difference but a few extra on the xc, baseball, volleyball, football, lacrosse, basketball, etc goes a long way.
"drawing and singing are academic pursuits. part of the liberal arts. And I am not sure there are painting scholarships anyway. Are there?"
There absolutely are. States give out a lot of money for scholarships in the arts and individual schools usually have money set aside specifically for arts majors. I know of one d2 school that has 10 full ride scholarships set aside every year for music majors.