I dont think the hoosiers are playing above their talent level, but rather are finally getting back to where they should be. They were a top 10 team earlier in the season and beat some pretty good teams even without DJ White.
With that said an elite 8 run is definitely possible and I actually have them going that far as a homer, but if i were to actually have money on it I would reconsider. Coaching plays a huge role in tourney play and lord knows IU has probably the worst coach of the bunch. On top of that Robert Vaden hurt his ankle in the final few minutes against OSU and he probably won't be 100% and thats a huge blow.
IU still has the talent to go for sure, but taking them far may hurt your bracket more than help it.