As I type this it looks like Houston is going to lose to Southern Mississippi. It would seem that this is good news for Michigan - it certainly isn't bad news.
This (pretty cool) BCS bowl predictor thinks the only two games that matter if Houston loses are LSU-Georgia and Iowa State-Kansas State.
Although this isn't the order the games are played - If LSU wins - M is in the Sugar Bowl. If LSU loses, Iowa State will have to have beaten KState for M to go to the BCS, in this case the Fiesta Bowl.
The game in Manhattan is currently at the half with KState leading 17-14.
Sugar Bowl possible opponents are TCU (if they beat UNLV - currently lead 21-6), WVU (if Boise St beats New Mexico) or the loser of in Bedlam if the upsets occur.
The opponent in the Fiesta Bowl would be the Bedlam winner.
Of course I have no idea if the website with this predictor knows what they're talking about...