I agree that it's somewhat related insofar as schools may have less money to offer a coach if it had to pay players. However, I'd guess that the schools would spend less on facilities because a great coach recruits better than a great building.
However, I don't think the issue of paying players otherwise impacts the argument regarding whether a schools should pay the market rate for the coach of their choice. As I mentioned, it may only impact some schools' ability to pay that market rate. I don't think it impacts Michigan at all. The next Big Ten Network check will pay Harbaugh's salary.