Too bad the author rushed this into print without carefully reading Freeh's report and waiting for revelations from the upcoming Curley/Schultz trial.
There is no good evidence that Paterno knew about the 1998 investigation. The email mentioned had the subject line, Jerry, so the coach referred to was probably Coach Sandusky.
Had Paterno known of the 1998 investigation, he might have fired Sandusky because he glad to see him gone.
I suspect Curley and Schultz kept news of the 1998 investigation from Paterno. In 1998, many thought Paterno would soon retire, and Curley could have wanted to keep Sandusky around as the next head coach.
When Paterno told Sandusky he would not be the next head coach, he really had no way of enforcing that. The only way Paterno could assure Sandusky would not be the next head coach was to remain as head coach himself.