derleider: you make this statement in your post...I a not too sure if I am getting what you're saying:
"...nor is MORE and HARDER classwork necessarily a great selling point"
As i understand it, I would dispute this wholeheartedly. Honors programs at universities, in addition to having closer bonds with faculty and generous scholarship opportunities, provide the students with the rigor they desperately want. Imagine a top football player in NJ choosing btn Rutgers and, say, Monmouth. Both offer a chance to play football and go to college in-state. The best football player would surely choose Rutgers, as it offers him a chance to compete at the highest level athletically. We have the facilities and the track record of putting guys in the NFL these days that Flood can sell. Monmouth does not have that (apologies to Miles Austin, as he is an anomaly.
Honors programs attract the best students in large part due to the rigor. They want to be challenged, to live up to the challenge, and reap the benefits down the road in their next level of scholarship (grad school, med school, law school careers in research). These kinds of students know early on that they have a lust for rigorous academic course work and don't want that to end. The MORE and HARDER class work is exactly what they are seeking.
In the case I used above, Monmouth vs. Rutgers, I would replace Monmouth with the Ivies, the Duke's, the UVA's, UNC's Michigans, the Cal's. The reason is that those schools have a long held reputation that they are challenging environments for top students. Those students want to be in an environment with top faculty, but ALSO top students who they can work alongside and compete with.
It has been a while since I've had a conversation with a Rutgers faculty member about this, but many lamented for a long time that their best students deserved a true honors program and that Rutgers lacked it. They would also speak of students avoiding Rutgers because the rigor at other schools was on display more effectively. Surely, there were/are honors societies, there were/ are opportunities to move on past pre-req's, and surely, there are plenty of great faculty who take top students under their win and mentor them. This program will offer those much needed avenues to challenging course work.
And having them in their own building creates a prestige that will help jump-start this program's reputation. Imagine faculty recruiting a brilliant scholar from Ohio. They can bring them to campus and show them their home-base for the next four years. It's not unlike Flood taking stud LB's from Don Bosco to our facilities and telling him that this is the home-base that will help him move to the next level.