Wanted to contribute my two cents to this debate...
I finished my MSN at WGU in Education in less than 4 months.
Although I never intended to, the MSN program inspired me to pursue a PhD. I love online learning, but I wanted to attend a somewhat more traditional school for the terminal degree, to help secure my future job possibilities.
I applied to the University of South Florida, which is local to me. I was nervous they may question my flat pass fail 3.0 GPA, or the fact that my student mentor wrote a letter bragging about how I completed my degree "in record time."
No questions asked - I sent my transcript, my personal statement, and I had to take the GRE. A few weeks later, I received an acceptance email!
So don't despair - online degrees are more common, and competency based learning is acceptable. Prior to applying to USF, I had contacted other large universities, even George Washington and Villanova and asked them if my pass fail GPA would be an exclusion. Each school basically replied by saying no, it's not an exclusion, we evaluate the whole package.