Michigan's offense is anemic, but their defense is very good.
I honestly don't think that what we saw in the USC vs Michigan game is a true indicator of each team's consistent performance (USC isn't quite as dominant, and Michigan isn't quite as bad). Both teams should be ranked later on, and that day just happened to have Lady Luck throwing USC more than a few favors.
But, I do see where you're coming from, that at this time, the win over Texas that pushed them into the #1 spot looks a lot more tarnished now, and doesn't quite have the same hype that it did at the beginning of the year. That's a fair assessment.
Still, by regular season's end, there is more than a fair chance that the wins over Texas and Washington will have a bit more luster, since both teams should also be ranked at that time, barring some complete meltdown by either.