1. It's really hard to go undefeated anywhere. While Cincinnati's competition isn't as tough as ND's they aren't able to get ND-caliber recruits either. Going 12-0 is a great accomplishment. Also their schedule that year is pretty similar to what FSU has faced this year (linked).
2. The second half of this season and the instances you list were very poor. I agree that without the 2012 result, Kelly would be on the chopping block. As it stands, he has earned another year.