To answer your first question as simply as I possibly can: no, I don’t think the Big Ten needs to go undefeated to make the College Football Playoff. Sure, the Big Ten is going to be docked — and rightfully so — for only playing a nine-game season while the other conference championship participants will have played 11. But still, I would put my money on an 8-1 Big Ten Champion Ohio State making the playoffs.
To answer your second question: that’s less likely. One would assume that Penn State’s loss would be to Ohio State, Ohio State would then lose to say Iowa, but Penn State would be able to avenge their loss to Ohio State in the Big Ten Championship game.