Did the team really win the championship in 1952, coming out of nowhere?

No. In the movie Hoosiers, the Hickory Huskers emerge from nowhere to win the title. In real life, the Milan Indians won the title in 1954 not 1952, with a 19-2 regular season record. The Indians had made it to the semi-finals of the state tournament the year before, after the 1952-53 regular season. They were however, often considered underdogs because of their small school size of 161 students.