You have some good points, and I agree that this one is on the defense. You cannot give up that many yards and that many points and still expect to win, unless you are Mizzou.
With that said, I saw a little different of a story with our defensive strategy. I, like you, do not profess to have a lot of knowledge of X's and O's. What I saw happening early in the game was that we were blitzing our guys out of position to make plays - the Dufrene screen reception for a TD is a primary example. The problem I see with Shafer so far is that he might be a little too "blitz happy." It is no surprise when we blitz, so we lose some deception because we are a blitz happy defense.
However, I can see how it might be necessary to blitz because we are trying to protect our secondary. Think back to the 2006 season - our secondary was really bad, as it would turn out, but it was disguised by the fact that we had Woodley and Branch on the D-line getting pressure.
I think that we stopped blitzing and went into a coverage scheme once Shafer realized that we were getting burned by screens and quick throws - Juice did just enough to keep us off-balance.
Anyhow, I think that what this all ultimately comes down to is a lack of talent on defense in key areas, particularly at Safety and Linebacker. We have mental errors which lead to huge gaps in coverage, poor tackling angles, and blown assignments (cough, Stevie Brown) I think the fact that our D-Line and CBs are legit has largely kept these weaknesses from being exposed, but Illinois went right after us time and time again using screens, and quick, short passes over the middle.
And, I think we should all credit Illinois for having a great gameplan and even better execution. Williams, Benn, and even Dufrene are talented players who have experience. A breakout game like this was invitable for this Illinois team - I was just hoping it wouldn't have been against us!
Oh, and Gsimmons, please feel free to step in here and drop some knowledge on all of us aspiring/NCAA football defensive coordinators!