That is fucked up; all the schools I've ever attended require expulsion, not failure, for proven cases of plagarism. Expelled students are basically immediately expunged from the records of any classes they were enrolled in at the time, as if they had never registered for them.
I can't speak for all of Michigan State University, where I got my degrees, but the computer science departments took it pretty seriously. One 101 course got roughly 1/3rd of the people in it failed one semester for copying. All homework assignments went through a turn-in system that examined the programs for plagiarism; details were sketchy for obvious reasons, but I had heard that a simple variable rename would not get past it. (Home-grown and based on what I heard, I believe it existed and worked roughly as described, since I could now write such a tool myself if I had need.)
A huge percentage of her students turn in plagiarized papers; so many that, if she were to follow the school's guidelines on them all, would result in 1/2 to 3/4 of her students failing. The teacher's pass/fail percentage is one of the criteria used to determine whether a teacher gets any more classes, and does not take into account students failed for plagiarism.
So, if she were to fail those students, she would not get any more classes to teach, thus she'd be out of a job. She's forced to keep track of who she's failed what paper for, to spread the bad grades across as many of the plagiarizers as possible, to cut down on the number that outright fail (and thus impact her).
She has gotten absolutely no support from her superiors about this issue. However, another teacher I know at the same school has a slightly milder version of the same problem, but her superiors are more supportive of her, meaning she's not always worried about her position.
It's pretty fucked up, and kind of depressing.