Sounds like cheating to me. If the NCAA had any integrity they put a stop to it. Don't look for that to happen any time soon.
Is it permitted by the rules? If so, then how in the hell is it cheating? Is a flea-flicker cheating? A fake punt? A bounce-pass style lateral?
BTC will correct me if I'm wrong, but I think it's more a loophole in the rules. The intent of the NCAA was to put a firm limit on the number of assistant coaches when the rule was instituted many years ago. It took the Big Time programs awhile to figure out how to get around it. Basically, the NCAA is looking the other way when this rule is circumvented. It's more like throwing a spit ball than a fake punt. It's OK as long as you can get away with it.