I think Bill O'Brien has been granted a tremendous opportunity at PSU. For the next 4 years PSU football will celebrate wins like the super bowl and blame the losses on Mark Emmert and the NCAA. O'Brien no longer has to worry about respecting the legacy and traditions of Penn State because they got nuked by the Freeh Report. He can now rebuild penn state in his image without the pressures of following one of college football's greatest coaches. You think following Lloyd Carr at Michigan was hard, try following JoePa at PSU regardless of the circumstances. He essentially has 4 years to prepare for the 2016 season and beyond and nobody can question his methods with "That's not how Joe did things".
With smart, targeted recruiting strategies I think a school like Penn State, even with 65 scholarships, can be competitive in the B1G. I don't think Bill O'Brien is in as bad a situation as we think, but it could be a glass half-full viewpoint.