Freelancing: Short vs Long-Range

I share your distaste for self-publishing, although I've never put it quite as succinctly as you do. However, at the 2-year college I attend, there's a literary arts club that produces a free, self-published journal showcasing the collected works of literary and visual art submitted by students and staff. All of the work submitted to the journal does not, by dint of submission alone, make it into the journal. Rather, the work goes through a process of review and rejection or acceptance by members of the literary arts club. The club designs the cover and layout of the book and raises the money for the publication through various activities throughout the year.

My creative writing instructor is a strong proponent of freelancing. In her classes, she'll host workshops and bring in authors who have made a living through freelance work. This particular instructor advocates submitting to the journal produced and self-published by the club because it gives the author credibility in the publishing field. So I suppose my question is: If a book is self-published by an organization that solicited for and reviewed submissions, is that quite as bad in the eyes of publishers as vanity self-publishing?

It's not quite self-publishing, so no. If you have in mind to publish that work anyplace else, be sure you understand what rights you've granted the journal (and what rights they understand you've granted them). Do also submit to other journals, etc. One publication (especially one at your college) does not a resume make.
Or, of course, you could only submit to more generally recognized journals. If the reason you're submitting to your college publication is because it's close and you haven't realized proximity doesn't matter in this stuff, or because you have the sense that the bar is lower at this publication, well... neither of those are acceptable attitudes for a freelancer who wants to be successful.