Before I get negged into oblivion, let's all take a second to realize that RR is a very smart football coach. He knows (like we do) that the success of this offense revolves around good (if nor great) quarterback play. And so do Denard and Tate. By keeping Nick Sheridan in the fold it somewhat takes the pressure off of the two (fabulous) freshman QB's. It might seem harsh to throw Sheridan under the bus (so to speak) but this, IMO, is what RR is doing (and actually I think Sheridan can handle it, as he handled his former life as Death, (notice how he is not referred to this anymore?)).
I guess what I am trying to say is that RR knows Sheridan will not lead us to the promise land (8+ wins), but by including all 3 QB's int the "competition" for the starter spot (or having 3 "starters") it reduces the pressure any each of them to perform.
Also, teams (including ND, who is at least a 2 TD favorite vs. Nevada in there opener, thus already preparing for Michigan, somewhat) have to prepare for three different QB styles, and know virtually nothing about two of them. I think RR knows how smart this is, ad he gets to protect two of his most important players at the same time.