AP and even CFP rankings aren’t meant to be a pure analytics power ranking. OSU has a better resume than ISU. A 3 point win at him doesn’t change that. If you want to use your same logic if ISU wins the next two and Iowa loses two more should they be ranked ahead of ISU?
People want to discount the early losses like it’s an ESPN NFL power ranking because ISU is playing really well. ISU is probably one of the best 12-15 teams in the country, but ISU has an 18-23 type resume.
The committee has proven time and time again that early losses don't carry as much weight... Yes, Iowa State is two loss team but who you lose to also matters. Not all resume's are created equally and for the most part the committee has done a really good job in years past weighing this.