HT, those are difficult questions to answer from my standpoint since I don't know what goes through the minds of the PDs here
My gut feeling would be that it might be a bit harder for an outsider but not impossible. For instance, IM has many spots each year and many of them are outsiders. However a quarter of them are filled by Michigan grads. General surgery usually reserves 2-3 of their 8-10 spots (?) with Michigan grads. Path usually fills 2 of their 6 spots with Michigan grads. Other fields, I'm less sure about but one can just do the math I guess by looking at the actual match lists.
The whole grade deflation hypothesis (or theory depending on the truth of the matter) I mentioned before is something that's going around by mouth. I can't really ascertain the truth behind it. However, IM and pediatrics clerkships are the hardest to even get a high pass let alone honors (again 50-60% of the 40 students doing the rotation at any given time automatically get a Pass). I certainly hope that this is not a scheme to trap people in Michigan for residency. But one can look at this in two ways:
(1) I have lots of P's on my transcript...I'm screwed...I'll never be able to leave Michigan or will be forced to go to what I perceive is a worse institution.
(2) I have lots of P's on my transcript...thank God Michigan understands...at least I'll have a good shot at matching at my home institution!
It all depends on where you're coming from and your mindset I guess
Again, my gut feeling is that Michigan PDs would be more sympathetic toward a Michigan Pass than a Pass from another school. But I qualify myself in saying that I don't know what really goes on in the PDs minds here. Some or all of this may be true...or my statements may all be a load of bunk.