If a 2 loss team, for example Michigan State this year, is better than a team with no losses, Florida State, who cares? I want the best teams in the field. There's no one on earth that can convince me that FSU was better than TCU. 8 teams fixes that and doesn't "water down" the regular season. If anything the regular season was heightened this year and prevented the awful BCS matchup of Alabama and FSU based on media hype. Taking 8 teams out of 125 does not diminish the regular season IMO, it's not close to the NBA or NFL ratio. I wouldn't be against doing away with the conference championship games to enable 8. Having the first rounds games at campus sites of the higher seed eliminates any travel concerns.
IMHO Playoff teams should never be awarded home field advantage.
It's how a lot of playoffs in a lot of different sports work.