I think that a few people have already corrected the misinformation earlier in this thread, but here's a summary from my perspective:
Yes, this is a "weird" setup if you mean it's unusual. It's also, as has been mentioned, a HUGE benefit for us. We don't have to go through the national match process, and you don't have to run the risk of moving halfway across the country. The internship slots are in the same geographic region as the practicum slots. Not participating in APPIC doesn't make it any less APA-approved.
If you're skeptical of its legitimacy, Widener's internship director, Dr. Linda K. Knauss, ABPP, is on the APA Commission on Accreditation.
http://www.apa.org/ed/accreditation/coalist.html
As for the down side, it is an expensive program. While you do get paid for the two years of internship, you do continue to pay tuition during your 4th and 5th years.