If that is how you define ethics you need to rethink yourself....
What's so wrong with saying, "If you don't pull your weight, your gone"? Every single one of us faces this every single day when we go to work. Why should these kids get special treatment? I'd have an end-of-the-year review and tell the kids, "You will remain on scholarship for the spring, but by next fall you won't have a scholarship." It gives them plenty of time to transfer or make other plans. Why is that so unethical? This is sports. Sports has always been about the best receiving the rewards and the not-so-good not getting rewards.