Curious what your feelings on Rich Rod are? He never seemed like a great fit within the confines of traditional Michigan Culture, but that had to be clear to everyone prior to hiring him. He was obviously going to struggle initially, as he did not have the players to run his system. That said it seemed like he was starting to turn a corner before he was fired. Hoke ended up going to a BCS Game with Richrod's Players. Its not impossible to believe that he could have done the same.
Great question and an even longer answer, but here goes.
I want to say that, first and foremost, I believe Rich Rod is a very good coach. If all things were equal, he would still be the coach at Michigan. The problem was that things weren't equal. There was a lack of talent on the offensive side of the ball. The big rumor was that Lloyd Carr wanted to retire at the end of 2006, but was talked into staying for one more year to see the trio of Chad Henne, Mike Hart, and Jake Long to the end of their career (Henne and Long probably would have gone pro after 2006 if Carr had retired). In all reality, he stopped recruiting in 2004-2005. Except for a few big name players, he signed flyers and kids he didn't have to work too hard to get. The only true offensive talent on the roster after that year was Ryan Mallett (a head case under Carr). He left soon after RR was hired. When RR was thinking about the Michigan job, he was told by his friend, former WVU coach and UM assistant under Schembechler Don Nehlen, it was the best job and any coach would have had the utmost support. So RR took the job. He tried to get his DC, Jeff Casteel to come over, but Casteel declined at the least second. Casteel is now his DC in Arizona.
Michigan had quite the country club atmosphere and RR doesn't coach that way. Many players were grumbling about the work load. Two of the freshman made some off the record comments (they really weren't trying to "out" RR, just answering questions) that led to the "scandal." Contrary to what other schools have done, Michigan opened up everything, let the NCAA pour through their records, and found Michigan guilty of 20 minute of practice over (the warm up and stretching period before practice) and a graduate assistant present at the workouts. That's it. Nothing more than a witch hunt, in my opinion. That led to some football alumni, who already was skeptical of outsiders, to go sour. Michigan, especially the football alumni, never gave him, nor his offense a chance. The messy divorce from WVU was another issue as Michigan's name was dragged through the mud.
With all that being said, RR did himself no favors either. He basically used his first team defense as the scout team and forced his 3-3 defensive style on whomever he had for a DC (both Scott Schaffer and Greg Robinson were 4-3 guys). He never recruited like he was at Michigan. He kept recruiting the same style of kids like he was at WVU (the same style he's recruiting at Arizona). The loses were the true killer, though. He was the coach that broke the bowl streak (32 years). He broke the seasons without losing records streak (almost 40 years), and his team looked horrible doing it. The best thing he did was recruit Denard Robinson to play QB (Florida wanted him as a DB or WR in the Percy Harvin role). Without Denard, it would have been a bigger disaster than it was. Denard and actually coaching defense are the reasons Michigan won that Sugar Bowl.
I still like RR and will root for Arizona when they play. It may not have been fair how he was treated, but he needed to be let go when he was. There was too much animosity from both sides. How he was fired is a different story, but that's a Dave Brandon special.