Up voted, very well stated. I'm pretty firmly in the "it is bad coaching" camp, but I do see some of the points you are making.
I would counter though that we have depth, it's just young and inexperienced. In my mind, if the guys you have out there can't grasp schemes, or make stupid decisions, why not bring in some new bodies? The defense couldn't get much worse than it was.
While I agree that recruiting rankings are fairly meaningless, it still must be noted that either the coaches are not developing the legitimate talent we have, or they are recruiting the wrong guys. I say its the coaching based on no improvement throughout the year, no in-game adjustments, poor basic football technique, etc. You mentioned MSU, they consistently do more with less talent than we bring in.
I firmly believe it is no coincidence that since Tressel's departure, our D has regressed to a point where most of the fan base is tearing their hair out. It's sad, for years we fielded solid to great defensive units and screamed about our vanilla offense and poor line play. Now we get a dynamic offense, and our defense is a leaky sieve. Ugh!