I've come back off my ledge and I'm again starting to think that we get in. On a conference call with the news media, selection committee chair Kirby Hocutt said "The separation there, 4-7, is not a wide margin of separation".
Since Michigan's resume is complete, they really don't have any opportunity to improve it. Whomever wins the Big Ten championship will add one big feather to their cap which should separate them from Washington. If both Washington and PSU win, then Michigan will drop to 6th (and maybe even 7th behind the B12 champ), Wisconsin and Colorado would drop but Wisconsin would remain ahead of Colorado.
So it then becomes a comparison between Washington and PSU. Penn State will have two wins (Ohio State and Wisconsin) that will both be better than Washington's best win (Colorado). Washington should also get dinged for the horrible out of conference schedule, 127th out of 128 teams. I think those two criteria more than make up for the one extra win that Washington has (if we played the same OOC schedule that Washington did, we'd only have one loss too).
It would also help if Va Tech's expected loss to Clemson would drop them out of the top 25 opening up a spot for Iowa and giving us another top 25 win - Temple beating Navy would also make room for a slot that Iowa could fill.
So I'm back on the glass half full side of the equation now.