The basic problem with that line of argument is it arises from a very faulty premise. While the Texans' record was 10-6 and the Titans finished 9-7 last year, that understates the differences in the comparative quality of teams. Take, for instance, the Estimated Wins metric at Football Outsiders, which takes into account situational DVOA and emphasizes consistency. By that, the Texans were 1.7 games better than the Titans (10.0 to 8.3 EstWins). Take, as well, Pythagorean wins, which have been more accurate at prediction season-to-season variations than regular wins. By PythWins, the Texans were 2.7 games better than the Titans last year (10.9 to 8.2).
Of course, there's also reason to believe the Texans were better than their record and those numbers indicate they were. Starting quarterback Matt Schaub only played ten games last year, then backup Matt Leinart was also lost for the year, which meant they suffered through almost six games worth of rookie third-string quarterback T.J. Yates starting. While Yates played well enough to win a playoff game (against the Bengals, who beat the Titans in Nashville last year), the Texans were on the whole only an average team with him in the starting lineup. With that and the under-performance in the games defensive coordinator Wade Phillips missed, there's good reason to think the normally-reliable Estimated Wins metric underestimated how many games the Texans should have won. When Matt Schaub was in the lineup, the Texans were about the best team in football. Their DVOA the first ten games, with Schaub, was roughly 30% better than the Titans' overall DVOA. To put that in perspective, by full-season DVOA, the Titans were 24% better than the the Jaguars (who finished 5-11).
None of this means that there's no way the Titans can't pass the Texans in 2012. The difference between the two teams, though, is a lot closer to the difference between an average 12-4 team and an average 8-8 team than the difference between a 10-6 team and a 9-7 team. While the hypothetical me who bets wouldn't bet on the Texans to win the AFC South at -500 as the odds apparently are at one book, the Texans should still be regarded as overwhelming favorites to win the AFC South in 2012.
How well does DVOA differences between two teams correlate from one year to the next? Because, if there is no correlation then this whole post is essentially "hogwash".
I think the Titans will improve greatly now having an actual offseason with the current coaching staff. I'm not sure if the Texans will improve, especially considering Wade Phillips' defenses in the past actually regressed in his second year as defensive coordinator.
@shawneriksmith Individual teams' DVOA correlate a lot better with their next-year DVOA and wins a lot better than their wins correlate to the next year's wins. See http://www.footballoutsiders.com/info/FAQ.
Obviously, the Texans could get much worse and/or the Titans could get much better. But if neither of those things happens, then your expectation should be the Titans finish about two games behind the Texans, not that the Titans might pass the Texans if they get a little lucky.
There's also the fact that the Texans clinched the division with 3 weeks left in the season, and pretty much called off the dogs. With a rookie QB, a playoff spot clinched, and a first round bye unlikely, the Texans played it VERY safe in their last 3 games (losses to Carolina, @ Indy, and Tennessee). Hell, they GAVE the Titans game away, scoring a TD late that could've tied the game, but going for 2 and the win instead of the tie because they were so desperate to avoid overtime.
@RussellWing Yeah they gave the game away, but we should have won reagrdless if not for Hall and his lack of ball carrying skills.