I think Michigan has a bad chance of going unbeaten. In any case they did much better in the rankings I like than I thought but subjectively they've been unimpressive every time I've watched them this year and they were pretty much manhandled by Va Tech.
Then you didn't watch them play Nebraska or Illinois. Even against Ohio State they were pretty impressive; tOSU was obviously just mailing it in for the Gator Bowl in going to a new coach that didn't even coach them for the bowl game, but for "The Game" they had a chance at ruining Michigan's season and were playing much harder.
Yeah the offense really struggled against Va Tech, but the defense played pretty well. Also you're ignoring the fact that Michigan's two best offensive linemen were playing hurt (one of whom wasn't in on the first series) and their second-best defensive lineman played on one leg the whole game and had to get to the press conference on crutches. On top of that, another defensive lineman was ruled out of the game and replaced by a freshman (although that freshman played fairly well).
They definitely won't look as nice as other squads going into next season, but they're within upset range. At the very least they will contend for the conference title.