True if USC beats us last year, for instance, they're 10-2 and a serious at-large contender. But if they beat Fresno or whoever instead, they're still 10-2, without the downside risk of a potential loss to us, and a 10-2 B1G team is a serious contender regardless. If Lincoln Riley's job hinges on making the playoffs (as it does), I can see why he'd choose the less risky approach. Even if it's bad for the sport.
Now, for the next tier down - the Wisconsins and Michigan States - I agree it's worth shooting their shot at a marquee win. But they're unlikely to begin with, and we won't get any credit for beating those teams.