I'm not going to pretend I know who was better because I don't actually recollect any of this season, except for the Nebraska/Missouri finish(ABC must have switched to it after the game in my area), and the Rose Bowl game. Perhaps I remember because both games had crazy finishes.
I will say, it seems like Nov 8th was the point where the AP made up their minds that Michigan was the better team. Granted Michigan did beat #2 PSU that day 34-8, but that PSU team went on to get blown out by MSU 49-14 and blown out by UF in the bowl game. That PSU team didn't even finish in the top 15. That was the same day Nebraska beat Missouri in OT. That Missouri team went on to finish #23, 7 spots behind PSU. After that point Nebraska had the better close to the season IMO, winning the Big 12CG and Bowl game by an avg of 32 ppg. Nebraska did have the two best performances that season by beating Tennessee by 25 and Kansas State by 30 both of whom finished in the top 10. But on the flipside, Michigan probably had the tougher overall schedule that season.
Also, im not sure why the Baylor game is being brought up to discredit Nebraska, like the one Michigan fan keeps doing? Both games were blowouts. Nebraska actually had a larger lead going into the 4th quarter than Michigan did. Michigan scored with 2 minutes left in the 4th to win by 35. Nebraska won by 28. Admittedly, Michigan played better against Colorado than Nebraska did. But that's just one singular data point.