1) Improvement: books have been filled on the subject of 'breaking through' -- the notion that as one reaches higher levels of competition, effort increases exponentially and performance/success nears asymptotic. Put simply, it takes a whole lot more to make the same amount of improvement. To an outside observer, things appear stagnant, and human nature often turns this perception into regression (our memories are neither perfect nor objective).
My take is that the Cats have hit that wall, hardly surprising given the number of freshmen on whom they depend. But that does not mean they are not still improving; it's just that much harder to perceive when your only data points are games. That's not to say that individually certain players are not improving, but as a whole I think they're moving forward and will break through soon.
2) Perfection: within the lives of current players, exactly how many college basketball teams have gone undefeated to win the NCAA tournament? Exactly. Sports history is littered with the stories of teams that almost make it, but in the modern era no one does.
Do the Cats need to lose in order to learn and improve? No. But so long as the loss takes place prior to the NCAAs, who cares? In my own personal sport's story, I truly believe that had my team lost somewhere else along the way, we wouldn't have had that undefeated monkey on our backs that took us down in the state quarterfinals...the idea that "we could not lose" took over everything we knew and we tensed up. Game over. I guess my point here is that perhaps these guys are getting so much build-up around their record that it's distracting them from having fun and playing their game. If they can find a way to do that AND keep winning, more power to them. But the other way (lose a game and the monkey BUT get back to having fun/playing their game) is more likely.