I looked through the final AP rankings from 2002-2009 to see how a hypothetical Western division would stack up.
Nebraska, Iowa, Wisconsin, Minnesota, Illinois, Northwestern
Penn State, Ohio State, Michigan, Michigan State, Indiana, Purdue
For kicks, I also tracked Penn State in case of less geographical but more balanced divisions, in which case PSU would be swapped with Illinois or Northwestern. Given that I'm at Illinois and people don't really seem to care about Northwestern in football, I doubt it would be a big deal.
I'm ignoring division depth and most of the actual games for the sake of simplicity.
The format is:
Year (highest big ten team rank)
Team, # ranking
Penn State, 9
2008 (8, OSU 9)
Penn State, 8
Penn State, 24
2005 (3, OSU 4)
Penn State, 3
2004 (8, Michigan 14)
Penn State, 16
-A Western division would produce a similarly ranked challenger (<6 difference) except in '02, '05, '07, and '08, mainly due to Iowa. '02 would have been fine however, since it would be a top ten team (Iowa) playing OSU.
-Oddly, in '07-'08, the hypothetical Western division champion had a win over the actual Big Ten champion (Illinois in '07, Iowa in '08), despite the significantly lower ranking.
-Penn State in the other division would make for very balanced divisions each year except in '07.
-The Western division champion would be significantly higher ranked than an Eastern division champion in only 1/8 years - regardless of which division contains Penn State.
-The lone exception is 2004, when #14 ranked Michigan actually beat #8 ranked Iowa during the season. Good times.