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Likely, without the Hawaii game, Michigan would have been second in the BCS rankings, behind undefeated Tennessee and ahead of the actual No. 2 Florida State. But the strength of schedule penalty caused by the extra game against Hawaii would have been enough to knock Michigan behind Florida State and out of the national championship picture...
Although the media as a whole does not recognize this, the BCS narrowly avoided a major disaster with Michigan's ranking in 1998. I like to call the following scenario the Michigan-Hawaii dilemma...
...what did this game to due to Michigan's BCS ranking...
Going into the Hawaii game, Michigan was ranked 14th in the BCS, and its schedule was ranked 11th. But since strength of schedule is calculated based on a weighted combination of the sum of the records of opponents and the sum of the records of opponents' opponents, the extra 12th game against Hawaii--a winless team playing a weak schedule--crippled Michigan's strength of schedule ranking. The Wolverines plummeted entirely out of the published BCS rankings...
Nobody noticed this and nobody cared, because the BCS rankings only matter for the top teams anyway...