Lafayette is an FCS level school, same as Delaware, Villanova, etc. The Patriot League is now in it's third year of offering football scholarships. Previously, the league operated on the Ivy League model for football. The league has had some national level success (Colgate played Delaware for the national title in 2003, Lehigh and Fordham have made playoff runs) but I think we'll see a very competitive conference now that 3/4th of the rosters will be on scholarship.
I wouldn't say that "recruiting all over" is a new thing for Lafayette. Scholarships have opened up their board, for sure, but they've had recruits from all over the country, largely helped by the schools academic reputation. Just at the quarterback position alone they've had recent starters from Canada, Southwest Ohio, North New Jersey, and eastern Tennessee. They've also had a particularly strong presence in Florida for years before scholarships.
Not sure why Philly kids would avoid Lafayette. Joe McCourt, Marvin Snipes, Maurice Bennett, Leo Plenski, Marcel Quarterman, Matt Smalley, Mike Wojick, a good number of Philly area kids have been successful there. Kyle Mayfield from North Penn looks like he'll be their starting tailback this year. In general, it's been tough for them to beat Villanova for kids in their own back yard, but now that the financial playing field is even, I'm not sure why more Philly area kids wouldn't consider Lafayette. Stay away from Lehigh though...