I think Paterno was hoping that by announcing his retirement that the Board wouldn't fire him, and that it would accept his resignation on his terms. They didn't, which I think is a shame. Unless more facts come to light, based on what we know now, Paterno did what was required of him and didn't lie about the situation or try to cover it up. Assuming that stays true, I think his being fired is a knee-jerk reaction by a Board desperate to distance itself from the disgrace of what happened. But I don't see that firing Paterno, when they haven't even fired the AD who has been charged with perjury, is reasonable. Paterno is being punished for "not doing enough", which, while probably true, isn't a good reason to out and out fire the guy. Paterno isn't the sicko perp, after all.
All that said, and looking at it just from a football perspective, this will likely be the beginning of a death-spiral for the PSU football program, which will take them years to dig out of. They will have a hard time recruiting for several years at least. I think even recruiting a new head coach will be tough, as that person will know that recruiting will be hard for a while. And I would imagine that once the season is over, they whole current staff will be out. So it will be a tough road for PSU in the next several years, I would think.