Of course it's coach-speak, but also, you gotta remember, coaches are gonna watch film of an opponent and agonize over just the positives of it. Pelini could watch the Michigan game and watch Marcus Jones return and sit there like "Man, how are we going to defend THAT???" That's just how coaches are.
I'm sure he's sweating defending MarQueis Gray, cause he knows if his players don't come out focused, he is a guy that actually can make them pay a little bit. He's not on the field, he has to hope his kids realize they can't just sleepwalk and expect to win 38-0. So yeah, he probably does think this is a "challenge", but mainly on themselves, not that Minnesota is going to pound them or something.