The two in-state schools haven't met on the gridiron since 2011, when the game was cut short due to inclement weather. They should fix that.
In-state rivalries are great. Some may be lopsided (see: Ohio State's utter dominance over the rest of the state), while others are pretty intriguing (see: NIU as the "Chicago's Team").
In Michigan, you have two set's of good rivalries with the Big Ten's Michigan-Michigan State game and the MAC's Michigan MAC rivalry between Western, Eastern, and Central Michigan. Additionally, Michigan State did a great service to both themselves and their MAC counterparts, with their "Celebrate the State" series, that created great exposure to all programs involved.