I think the decline in Real Madrid's performance this season is due to the lack of activity in the transfer market. Currently El Real looks to be running out of energy, in La Liga it is starting to be seen that they are increasingly difficult to compete with Barcelona.
My prediction is that Real Madrid will only reach the semifinals this season. Ancelotti's current squad is not as strong as last season. Older players like Benzema, Modric and Kroos can no longer be completely relied on.
You think Real Madrid can pass Chelsea but will be eliminated in the next round. That's general opinion.
I don't think the problem is transfers. They have a strong enough squad. They're just not the best for now. There are better teams than them. Some things you can't buy with money.
Sometimes winning the Champions League don't have any relationship with performance of the club in their local leagues. We have seen teams that made it to the finals even when they are not in the top four position in their league. Most people predicted that Burussia Dortmund will have a smooth ride over Chelsea because of their poor performance in the league. But it turned out to be Chelsea's game. Real Madrid is not having a splendid season, that is why I am assuming that the game is open to both teams. Chelsea has all it takes to qualify for the semifinals.
Do you doubt that Napoli became the champion? In order to "officially" complete the title, they need to score only 14 points in the remaining 11 games. And this is provided that Lazio will not lose points. It seems to me that in about 4 games Napoli will officially become the champion because Lazio will not win every game, and Napoli just need to be no worse than the pursuers (which is easy for them because they are better).
If your analysis is correct, then except Napoli is unlucky, nothing can stop them from getting fourteen points from eleven games. A team that have lost only two games in the Seria A and one game in the Champions League will definitely get the needed points. They are also fortunate not to be affected by many injuries and they also have a good bench.