I would like to call Arsenal a win or draw the result in the first leg. The worst scenario is Arsenal to lose at home game.
Of course Arsenal must be able to take advantage of the status as a host in the 1st leg. At the moment, the statistics of the two teams are not much different, they are equally strong. I think there will be a difficult game. Even if you remember in the last 16 of UCL in 2016/2017 Arsenal lost by a margin of 4 goals at home or in Germany. After that, it seems that they haven't competed for a long time. Arsenal are in good condition, they still continue to compete as potential EPL champions. As for Munich, it seems they have been focused on the UCL cup. So they will work hard to win in the 1st or 2nd leg. They have the provisions to do that.
With the current Arsenal form and Bayern Munich form, Arsenal should be able to win Bayern Munich both home and away, but I don't know why it will be difficult for Arsenal to achieve such result. Bayern Munich are currently weak compared to other past seasons, which should be an advantage on Arsenal that is super hot to win them.
However, Arsenal can disappoint their fans and mess their opportunity of qualifying to the semifinals by allowing unstable Bayern Munich to drag victory with them. I don't see anything that Bayern Munich is playing anymore, after the lost 3-2 to an average club that they were leading 2-0 in the first half. Arsenal need to use their opportunity wisely.
You are right that there should be no reason for Arsenal not to be able to win this match when Bayern Munich's condition is unstable, Arsenal should be able to take advantage of this opportunity to beat Bayern Munich and advance to the semifinals. Arsenal must remember that their previous meeting resulted in Arsenal being eliminated in the UCL and Arsenal having to avenge that defeat by beating Bayern Munich. The opportunity will not come twice for Arsenal because they have been beaten by Bayern Munich for years and they finally meet again.
So, on this occasion, Arsenal is in very good condition, they are competing with the top teams in the title race, which means that Arsenal is very strong this season and they have prepared for Arsenal's meeting in the big match against Munich. If Arsenal is able to beat Munich, it will be a very proud achievement. for the English team because Arsenal and Man City are the favorite teams in the UCL.