Colorado beat Stanford and Utah. USC did not. That common opponent game can be played forever, which is why I think you have to go by conference standings in order to determine which teams advance, etc. There's no other logical or fair way to do it.
I have no doubt that football fans were treated to a much better game between USC and Penn State than they would have been if Colorado had played. That doesn't change my opinion on the importance of overall standings in the conference and divisions.