Penn State's "rivalry" games that must be included every year, in the current system, are Ohio State and Michigan State. Michigan's are Ohio State and Michigan State. Given also the geography of the East, I don't see Ohio State, Michigan, Michigan State, and Penn State in different divisions.
In all likelihood more teams will be added to make much of this discussion irrelevant, and weaker teams may be added from the East, with stronger teams from the West. We shall see.
Regardless, even if we stick with the twelve teams we have now, I am fine with Nebraska being in a separate division with Wisconsin and Iowa as the other "powers." Iowa has been stepping things up the past ten years, and if a good rivalry develops between Iowa and Nebraska than Iowa will only get stronger with the publicity and action from seeming to go head to head with Nebraska. The divisions, even with the current "big three" all in the East, may even out over time.
For what it's worth, I still like the idea of having no conference championship and instead having each team play one more game (if it is allowed by the NCAA). Every team plays half the conference one year, the other half the next, and then there is a reshuffle. It is fair and I don't like the conference championship games, even with a large league, and other than being a money grab (but six or seven or whatever extra games would net more), it hurts the league's chances at good bowls and serves little purpose. But hey, that's just me.