Michigan has 13 Q1/Q2 wins, 2 more than anyone else in the field, and those wins are considered wins against tourney teams. Their signature win is by 40 points on a neutral floor against #4 Gonzaga, still the best win of anyone in basketball. Plus, they're still NET #1. If the tournament starts today, they're still an easy call for a 1 seed.
EDIT: That said, it's been 3 weeks since they were that version of Michigan, but I don't think it's necessarily dropped them so much as it cut into the runway Michigan had built up over everyone else in college basketball.