Since there are 120 teams, I'd make 10 conferences. With 10 conferences, I'd drop the Big East from the BCS so that there are 5 BCS and 5 nonBCS (which would also open up an extra bowl slot to be competed for.)
Big 10: Since Academics are important in the Big 10, I'd leave out Iowa State (and as a Big 10 homer.)
Wisconsin, Minnesota, Iowa, Illinois, Indiana, Purdue, Notre Dame, Ohio State, Michigan State, Michigan, Penn State, Pittsburgh.
Pac-10: There aren't all that many West Coast teams, so they would have to move East a hair and pick up BYU and Utah.
USC, UCLA, Cal, Stanford, Arizona, Arizona State, Oregon, Oregon State, Washington, Washington State, BYU, Utah.
ACC: They would focus primarily in North Carolina/Virginia, and pick up a few Northern schools need be.
Connecticut, Boston College, North Carolina, North Carolina State, Duke, Wake Forest, Kentucky, West Virginia, Tennessee, Louisville, Maryland, Cincinnati
SEC: Purely Southeast geographic consideration
Florida, Florida State, Miami (FL), Georgia, Georgia Tech, South Carolina, Clemson, Alabama, Auburn, Mississippi State, Mississippi, Vanderbilt
Big 12: They are Big, afterall.
Texas, Texas Tech, Texas A&M, LSU, Arkansas, Memphis, Oklahoma, Oklahoma State, Missouri, Kansas, Kansas State, Nebraska
Big East: Would become a ACC/Big 10 B team
Army, Navy, Rutgers, Buffalo, Temple, Marshall, East Carolina, Ohio, Akron, Kent State, Northwestern, Central Michigan
MAC: Would become an ACC/Big 10 B team
Western Michigan, Eastern Michigan, Toledo, Miami (OH), Bowling Green, Ball State, Northern Illinois, Western Kentucky, Middle Tennessee, Iowa State, Arkansas State, Iowa State
Gulf Coast Conference: Would focus on the gulf coast; teams that didn't make the SEC/Big 12 cut
FAU, FIU, Troy, Louisiana Tech, Louisiana Monroe, Louisiana Lafayette, Central Florida, South Florida, Southern Mississippi, Tulane, Houston, UAB
CUSA: Teams that didn't make the Big 12 cut.
Baylor, SMU, TCU, North Texas, Tulsa, Rice, UTEP, New Mexico, New Mexico State, Colorado, Colorado State, Air Force
MWC: Teams that didn't make the Pac-10 cut.
Wyoming, UNLV, Nevada, Utah State, Boise State, Idaho, Fresno State, San Jose State, San Diego State, Hawaii
My numbers didn't add up to 120, so I missed two schools... some adjusting would have to be done.