Bit ambiguous. The way you describe makes the most sense but it comes down to lawyer speak.
My understanding is k St would likely win the 3 way tie. Then the isu-byu tiebreak, the k St game may not count because 1) they aren't really the #1 team, they are tied for 1st with us and isu, so you can't count them as the highest ranked opponent or 2) they aren't rhe "NEXT HIGHEST" ranked common opponent (meaning only the teams ranked below you count). I'm hoping the league would rule in our favor that the k St result should count but I've seen too many dissenters to count on it being a sure thing. Most of the simulators show isu winning the 2 way tiebreaker in that scenario and byu gets left out.