I don't like to make “if A beats B and B beats C then A is better than C” comparisons. Some teams just match up well against some other teams not others due to the style of Offense and Defense that they play. It would be fun to watch Penn State play USC though.
I think the Pac 10 and Big 10 are both over rated conferences this year. However, that is based on the assumption (from sports media) that USC was the best from the Pac 10 and Ohio State was the best team from the Big 10. I have not seen too much of the other Pac 10 teams—perhaps there is a surprise out there.
The Buckeyes certainly have not gelled this year - that much was obvious from their first two games - and not unexpectedly got completely clobbered. That said, there's a lot to be said for home field advantage...and for USC (and LSU, especially in night games) it means a whole lot...even moreso later in the year when the climate comes into play.