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For anyone confused about the scheme, it seems fairly benign:
The On-Air personalities were an important part of the show but were not going to get a trophy if the show won. Adding fake associate producers to the credits got an extra trophy to share with the people who contributed to their success.
Nobody cheated at the awards.
Why were they being excluded?
From the quote it sounds like this award was being designated to the show runners. There were other emmys for hosting/etc. that the hosts could have won.
I think it's fair for the emmys to designate who is eligible for the award, but I understand why ESPN would also want to recognize the hosts. Personally I think all these awards are mostly made up anyways, but I would say ESPN is more in the wrong as the emmys were specifically saying the hosts weren't doing anything worthy of an Emmy.