I think the Big 10 has to follow the SEC model and do it geographically and not the ACC model of...well...whatever it is that the ACC did. Drawing names out of a hat I assume.
Whatever keeps Michigan and Ohio State playing on the last weekend of the season. Unfortunately I think the TV people are going to screw that up because they're afraid of a rematch. The ACC already proved what a disaster it is to base your new setup entirely on the assumption that two specific teams will face off in the championship game: they put the ACCCG in Florida for years hoping Miami and FSU would be there and their chickens came home to roost when Boston College kept crashing the party and not bringing anyone with them.
Here's a reference map
There's a much cleaner break in the schools if you go East/West. It probably makes more sense from a rivalry standpoint as well. And while my initial reaction was that the East was way more powerful, after thinking about that a little more, top to bottom the West is better. The East is top heavy with OSU and Penn State, but they've got Indiana and Michigan there dragging them down. The West has Nebraska, Iowa and Wisconsin on top. The top 5 teams (currently) are split pretty evenly and the rivalries are protected.
These are the current protected rivalry games for the Big 10.
Penn State-OSU, MSU
Going with an East/West alignment, the Illinois/Indiana and Northwestern/Purdue games are the only ones lost to the divisions. Looking at the trophy games, Illinois/Purdue, Michigan/Minnesota and Minnesota/Penn State (didn't even know they had a trophy for that game) would be lost. But none of those games were protected games anyway, so there was no guarantee they'd meet every year.
Plus, this way Michigan and Ohio State can keep their precious game with no chance of rematch.
Edit to add: Regarding the Big 12 and their setup, when the Big 12 formed, the North was the far better division. Now the South is the better one. Things change in college football and past success is no guarantee of future success. Right, Michigan fans?