No, that is definitely not the case. Barcelona's team is still good, not good enough to be among the strongest contenders for the Champions League of course, but nowhere near lower table material.
Even Xavi will have a decent result with them and they will eventually end up in the top 4, qualifying for next season's CL. The problem is that Barcelona is used to winning big trophies and they will not be satisfied with top 4 finishes.
Real and Atletico look strong domestically and there's huge competition from around Europe as well, Barcelona with Xavi simply does not look good enough for me to be able to challenge there.
To be honest i am growing tired of this Barcelona's ideology of always wanting to bring former players to the club. I think they should scrap this process. That's why some teams don't perform well. At the moment Barcelona needs a more experience coach to handle the pressure and build the young squad. Xavi is good for Barcelona but I will say not in their current state. I really thought Barcelona would have go with someone with vast managerial experience that can instill that winning mentality into these young players other than Xavi. Xavi Hernandez's team in Qatar is defensively exposed. They conceded a lot of goals. With score lines like 6-4, 7-3, etc. The level of football in Qatar is different compared to Europe. Barcelona does not even have a proper defender at the moment and they don't have funds to spend in luring one.
I don't know how Xavi's team did in Qatar but I can surely say that Xavi doesn't seem like the best fit for this Barca team. As you said, they could have brought him maybe 3 or 4 seasons later after they get a stable squad. Right now they need someone who can build the squad and at the same time take out the best from the current players as Barca barely have funds to buy new players right now.