It sounds like you love the scholarship offer from MSU but are worried if it’s “good enough”. If that’s the case, you can rest easy. MSU engineering is a quality program that produces successful e engineers.
The challenge is it is not a direct admit to MechE. But it’s easier than the other non direct admit schools. If it’s a good fit, it’s a fine choice.
If money were no object and fit was good at all, I’d lean towards taking the direct admit offer at UIUC. Great reputation and direct admit is a fantastic combo.
So for me, it would come down to how much that money makes a difference. If it would actively change how I had to live my life or how much I could help my kid out in the future, I would go with the cheaper option.