Evidently others on this thread interviewed at Michigan and were not asked what their top choice school was, so my situation will not likely be experienced by all who interview here this year. However, the fact that it happened to me means that it will surely happen to others, and it is certain to happen at other schools too. With that said, you applicants need to be prepared to answer that question before every interview, and obviously your answer needs to enhance your interviewer's impression of you.
If you give an honest answer, and say that your dream school is elsewhere (though you would LOVE to attend their school, it's definitely a top choice, it would be a perfect fit because X, blah blah blah...), it will likely hurt you in the interviewer's eyes, because you would prefer another school to the one they are so proud of, and would even REJECT their school in the best case scenario; and if it doesn't hurt you, it at least doesn't help you, because while others are scoring bonus points, and improving the light in which they are viewed by their interviewers, you are falling on your sword for the sake of honesty, and a pipe dream that even you know will almost certainly never come true (if your top choice is Harvard, for example).
At the most basic level, I believe it to be an egregiously unfair question to ask an applicant, because whether purposeful or unconscious, it is impossible for an interviewer, and the eventual room full of adcoms who will decide your fate, to look at your application without some degree of prejudice if you would reject their school for another if given the chance. They are playing a game with you when they ask that question, whether they know it or not, and so you need to play it right back; you worked too hard for all those years to allow them to unfairly discriminate against you on the basis of a simple preference, which will most likely prove inconsequential, rather than solely consider the GPA, MCAT score, and publications (or whatever your achievements are) for which you bled so much to earn.
I realize that this is a very cynical perspective, but it will in no way compare with your level of cynicism if you answer the question honestly and end up with nowhere to matriculate at the end of the cycle. I should also say that I do NOT favor an 'all is permitted' approach to the application process; for example, I believe it would be highly unethical to tell multiple schools that they are your number one choice in your secondaries or update letters, and it should go without saying that you should never lie about or embellish your achievements at any point. In this specific case only would I advise applicants to give a dishonest answer, simply because they are being asked a dishonest question. This goes for all schools obviously, not just Michigan, and I don't mean to bad mouth Michigan either (one or two other schools asked me the same question) - I only share my opinion here because I would hate for any worthy applicant to put him/herself at an unfair disadvantage, and feel like they've screwed up the rest of their life if they don't get in anywhere (because that's what it will feel like).
