They were favored, and again, only in that rose bowl b/c the 4 team playoffs didn't include the rose that year.
ftr, I'm not saying James hasn't won big games. He has, but he has a terrible record in them 4-20 or something vs. top 10. To get to the next level you have to win games when the cards are stacked against you, when you're not the favorite. Sherrone Moore did it twice in 2 tries, that's impressive. Jim did it in columbus, and Jim beat saban too. Urban took the 4th seed to a championship and won.
You'd probably say Franklin is better than Dantonio, and I'd say you have an argument as Franklin is more consistent, but Dantonio beat OSU 3 times in 5 years, twice on the road, once against a 24-0 OSU team for a B1G championship. Beat Jim in the big house twice too, never as the favorite.