Michigan State is definitely a team that you cannot underestimate, despite the results of last years game. 19 starters back and they thrive in the underdog role. Lewerke and his WR's are very good IMO.
Penn State will be good again. People write them off in large part because of loss of star power, and say things like "they lose everybody" but then prop up teams like Wisconsin (who essentially has just as much back as PSU) because they return most of their well known players (particularly on offense). People also will prop up teams like Michigan, just because of the addition of a "star" player, and ignore the fact that the rest of their offense was a joke last year.
Defensively, PSU will be better in some areas and worse in others. The defensive line, particularly at DE will be better. Last year, they were rebuilding at DE coming into the year and then lost 2 starters by the time they came to Columbus. That gave Barrett all day to throw against them where as in 2016 he was sacked 6 times. They'll also be better at corner, with John Reid back from injury who was probably their best player in 2016, and Oruwariye who was 2nd team All-B1G last year. They'll be worse at LB and probably a bit of a step back at safety.
Offensively, if they run the ball better their offense actually could be better. They lose Barkley but really he wasn't that productive in B1G play. With 4 starters back on the O-Line if they run the ball better that would give their offense more balance. We'll see what happens.