He retains football eligibility, but not scholarship eligibility? Is that because it's a different sport?
Yes, and usually the baseball team pays for his school.
It does apply to college players, whether they are drafted as college players or drafted as HS players and allowed to play college football. Some players in the past were drafted out of HS, signed a pro baseball contract and went to college to play footbal, are Kenny Williams (Stanford WR and White Sox minor league OF, Doug Johnson (Florida Gator QB and played with Tampa Bay minor league team) Roscoe Crosby (Clemson football and Royals minor league OF)
The A's drafted Rodney Peete after his JR year in college, offered him $100K to play six weeks of summer baseball and then go back to USC for his senior year of college football. Peete declined the offer.