First off, I agree with you that this season made me realize just how good UM has been for my entire life, but also how people have kind of glossed over the "consistent inconsistency" that has doomed many of their seasons from ascending beyond the Big bowl/share of the Big 10 title level. Change for the sake of change is unnecessary; change for the sake of overall progression of a program is acceptable and, in most instances, encouraged.
Now on to your questions - my thoughts:
Success next season - 7-5 or 8-4 would probably be the upper limit, but I think a bowl game should be good enough for most fans at this point. Basically, don't look like ND this year and we'll be happy.
Offense - No idea. If we have one of the freshmen lining up under center, probably better than with Sheridan but worse than the love child of Shaun King and Pat White. The one element that was always missing in this year's offense was the fear of the pass opening up running lanes, and vice-versa. When Threet was in there, the defense (at least early in the season before Exploding Elbows became part of my vernacular) had to respect the pass but Threet couldn't really hurt them running (except against Wiscy). With Sheridan in, he could run a little better but since his hardest throw was also a spike to stop the clock, defenses just bunched the line. If Threet somehow learns to run and not get injured, or one of the freshmen shows some unexpected maturity in the system, the offense should be solid if unspecacular.
Small-school genius - Having suffered through 3 years of JLS while at State, I can tell you that he was one of the most overrated "geniuses" in recent coaching memory. Yes he turned Lousville around and made them respectable, but his teams never played defense and Conference USA (especially back then) was probably worse than the MAC. RR has two BCs bowl wins to his credit, and the Big East is still a BCS conference, even though I wouldn't rank it in the top 8 conferences in America every year. If RR had been hired by UM after Tulane, though, then I would agree some credence may be in this concern.
Defense - Though the line will be weaker, Graham sounds like he is coming back and I like Martin+recruits helping to make it respectable. If the DC picks a defense and sticks with it, and that defense does not make All-Americans out of 3rd-string running backs, then it should be decent, if still prone to the big plays we saw this season. The LBs look to have improved, though, so who knows.
Mental toughness - the reason they lost many of these games had less to do with the mental toughness and more with the fact that the team was pretty young, inexperienced, and immensely predictable. As people, including Brian, have pointed out during the season, this team never had another gear on offense. Once the opposing coaches went into the half and made some adjustments, UM simply didn't, or couldn't, also adjust. That falls somewhat on the coaches, but is probably also indicative of how limited this team was in terms of competent players at the skill position. I'll also add that the defense suffered a great deal in the second half because they (seemed at least) were out there far more than a defense should be. I don't have the statistic before me, but I thought I read somewhere that this defense saw more snaps than any in recent memory. Yes, they shot themselves in the foot a number of times, but after a while the big plays just happen.
EEEE Barwis - See above. Also, while the players looked better than in years past, I do think conditioning is a bit overrated at this level. These guys are all top college athletes - Barwis isn't starting from overweight couch patatoes. Most of the players were in pretty good shape to begin with, so improving even 10% takes quite a bit of effort and may not be readily apparent. Still, the S&C coach serves as the backbone for good programs, and I think the next few years will bear out that Barwis is a solid choice.
Innovator - Innovation only goes so far - see Mike Martz in Detroit and San Fran. When you have the best atheletes on the field, your formations and plays tend to look unstoppable. when John Kitna and Mike Furrey are trying to run plays designed for Torry Holt and Kurt Warner, you get the 2006-2007 Lions. RR's offense looks great with good players, so I fully expect him to carve up the Big 10 once he has better players for his system.
What recruits step in and play next year? Beaver or Forcier will probably start at some point, and LaLota and Campbell (presuming he signs) will likely see some playing time. After that, no idea.
How much does not having the extra bowl game practices hurt? - As others have pointed out, college football is a year-round game, and I don't see the lack of "official" practice really hurting this program much. Sure, an extra game with a month to prepare might help a little, but I don't see it being a game-changer.
Big 10 in 2009 - Completely my opinion - OSU near the top, with PSU, Iowa, NW, and Illinois all floating around beneath that. MSU will probably be in the mix a bit, but they lose so much this season that 6-7 wins is probably the ceiling. Until further evidence, Minn is still mediocre, though I like the direction their program is going. Indiana will still be bad, as well Purdue. UM will probably be above MSU and beneath the PSU pack, though who knows. It will be a down year across the board, though.