Yes they can schedule each other home and home, but as you correctly noted rarely do.
Example - Gonzaga and Memphis played home and home for a few years. ESPN also had their Bracket Buster schedule for a few years which setup and televised some of the better matchups.
Generally only Gonzaga, Wichita State, SMU, Cincy, and UConn/Memphis (at one time - not this year) ... and probably someone I am forgetting, would be considered a 'good win' - even though others like Middle Tennessee State, St. Mary's, etc. are really good this year.
Note that for Basketball, the Big East and top teams in A10 are the equivilent of the Power 5 in this context and are able to schedule some home-home games with the big boys.
Red's comment in another thread is spot on - if a good P5 team plays one of these schools in their home gym - the place will be packed and the mid-major will have the game circled on their calendar from the day it is scheduled. Usually when you see one of these, if you dig into it there is a reason - i.e. letting a senior play near his home town, some relationship in the athletic department, etc.
From a friend who closely follows one of these programs (VCU ... and I did let him have it after the win up there this year!), he said should they lose to mid-major it will be viewed as a 'bad loss' on their tournament resume so why risk it (worse than losing to an average P5 team - even if it's not really) - and their philosphy for non-conference is schedule several P5 teams if possible, regional rivalries, and teams they know they will win (and play at home) - along with an exempt tournament where they know they will get 1-2 chances at a big name scalp.
Also - follow the almighty $$$$ ... What would the TV coverage be, and what would they get $$$ wise if say Middle Tennessee State and Nevada played home and home ... The mid-majors will get the occasional home game vs. big name teams, but not often.
