[Edit: Note that I was writing this when Brian posted a front-page reference to the same idea on Slow States. All I can say is either great minds think alike or this is freaking obvious.]
What happened to the biggest rivalry of the old BIg 8 conference, Nebraska-Oklahoma, when it was split across divisions when the Big XII was formed? I'll answer that for you -- it was eclipsed by Texas-Oklahoma, a divisional rivalry. The collapse of that game is a major reason why Nebraska is leaving that conference to join the Big Ten.
What would happen to the Michigan-Ohio State rivalry if it were split across divisions? Could it be eclipsed by Penn State-Ohio State, a divisional rivalry? This isn't as far-fetched as you might think. An occasional championship matchup will not make up for turning the regular-season game into a trophy game instead of a must-win game with the divisional title almost always on the line. In the long run, the loss of this dynamic could damage the Michigan program and ultimately the Big Ten brand.
This doesn't need to happen.
It is possible to create both geographic equity (i.e., what Penn State wants) and competitive intensity (i.e., what Michigan and Ohio State should want) in a divisional alignment that preserves or protects all major rivalries. The only real question here is how to split up the quadrangle of hate (Nebraska, Iowa, Minnesota, Wisconsin, formerly a triangle) -- no matter how you do it, you're going to lose part of that. Without further ado:
- Michigan, Ohio State, Iowa, Wisconsin, Purdue, Northwestern
- Michigan State, Penn State, Nebraska, Minnesota, Indiana, Illinois
Protected regular-season games: Michigan-Michigan State, Ohio State-Penn State, Iowa-Nebraska, Minnesota-Wisconsin, Indiana-Purdue, Illinois-Northwestern.
- Michigan, Ohio State, Minnesota, Wisconsin, Purdue, Northwestern
- Michigan State, Penn State, Iowa, Nebraska, Indiana, Illinois
Protected regular-season games: Michigan-Michigan State, Ohio State-Penn State, Iowa-Minnesota, Nebraska-Wisconsin, Indiana-Purdue, Illinois-Northwestern.
I'm not sure which of these two are better in terms of the quadrangle, but you get the idea. This protects most border-war and all in-state rivalries while spreading out the divisions, thereby not screwing anyone in that regard (i.e., like Penn State would be if you put them in an otherwise western division).
Finally, lest you argue this is the ACC redux, let's take a look at their current alignment:
- Virginia, Virginia Tech, North Carolina, Duke, Georgia Tech, Miami
- Boston College, Maryland, North Carolina State, Wake Forest, Clemson, Florida State
I don't know if there are protected rivalry games across the divisions, but regardless, this is not a consistent system. Like the quadrangle of hate, the main problem for the ACC is how to handle the four North Carolina schools and, actually, I think the current scheme has got that right. The main problem with it is they don't split up Virginia-Virginia Tech, resulting in Maryland being split from Virginia.
If the ACC were to follow my methodology with regard to the Big Ten, it would look like this:
- Maryland, Virginia, North Carolina, Duke, Georgia Tech, Florida State
- Boston College, Virginia Tech, North Carolina State, Wake Forest, Clemson, Miami
Protected regular-season games: Maryland-Boston College, Virginia-Virginia Tech, North Carolina-North Carolina State, Duke-Wake Forest, Georgia Tech-Clemson, Florida State-Miami.
There, fixed two conferences in one go!