I agree that the divisions should be realigned, but I disagree with this proposed alignment. If Michigan and Ohio State are to be in the same division, then you can't also have Penn State or Nebraska in that division. Notwithstanding Penn State's current problems, they will be Penn State again eventually. Same with Nebraska.
Take the current alignment and swap Iowa for Wisconsin and Nebraska for Penn State. Make Iowa-Wisconsin a protected rivalry. Set up a new protected rivalry between Minnesota and Purdue (which would be much more competitive than Minnesota-Wisconsin). Rename the divisions North and South. There's your optimal alignment that makes competitive sense and geographic sense.