Not trying to speak for Go, but I'll weigh in with what I think he meant.
Penn State IS a blue chip program as you point out. However, since joining the B1G in the 90s, they've struggled to win the conference, let alone maintain their former prominence / elite accomplishments. Whereas they used to be a perennial NC contender, now they face uphill sledding in their own conference.
Sure, there have been intermittent years [every 10 years or so] where they've been the best team in the B1G. But most years, they are highly ranked, and then can't overcome Ohio State. Franklin's time there epitomizes this challenge.
So historically, they are still a blue chip program, as you assert. But their path has gotten even more difficult with the addition of a team playing at a very high level, like Oregon. Michigan just won a NC two years ago. Ohio State won last year. When was the last time psu won one?