I'll be on Penn St. I'll list the reasons.
Your post title is the reason why I'll be on Penn St., you think USC is happy to be playing in the Rose Bowl? Against another Big Ten team with no title shot? ESPN and all the media saying they should win by a large amount will get to their head.
Some "on the field" reasons would be that this seems to be the classic "first to 20 wins" kind of game. When points will come at a premium, I'll take 10 points.
Mark Sanchez seems to be all hype with little results. He has shown flashes, but he hasn't shown up when he needed to. When USC's run game is in a little trouble, he hasn't shown that he can put teams away or come from behind.
Special teams will be a big factor and I believe with the return ability of D-Will, that field position battle will belong to Penn St. I think he will mean 5 to 10 yards every punt, which will make a huge difference in a expected low scoring game.
The one thing that will keep me from betting big will be that this will be a home game for USC. In these hard times, it's going to be hard for Penn St's fans to travel across the country and attend this game. It's expensive (travel, hotel, food, tickets, renting a car, missing work, etc.). While USC fans just have to be stuck in traffic for 3 hours. I believe it will be 70 to 80 percent USC fans.