Well, Madrid, honestly, has to play everything, and one of Ancelotti's premises has always been to play City with the utmost care. I think that Madrid will not consider that City is in a very bad moment, they will play thinking that they are in their maximum prime, they will not be overconfident. Ancelotti's strategy is to score a goal or two, and to lock themselves in defence and withstand any storm that comes their way. Now, he cannot do this much because Madrid's defence is very bad right now, and City can take advantage of that very well.
Manchester City and Real Madrid have nearly same quality even Real Madrid are the most successful club in Champions League and Manchester City only won one title there. Their matches in three previous seasons show that their quality difference is not too big, but this season Manchester City with their crisis after an injury of their key midfielder Rodri, can be considerable weaker than Real Madrid.
Their big defeat by Arsenal is a warning about their quality and competitiveness in this season, but Real Madrid with a latest draw with Atletico Madrid and two big defeats by Barcelona, also are not a perfect team and have weakness that can be exploited by opponents. Manchester City even in their crisis, if play well, can beat Real Madrid in Champions League.
Real Madrid performance this season has not been as consistent as expected, failing to automatically qualify for the last 16 indicates that there are shortcomings in their performance compared to last season. On the other hand, Guardiola has prepared his squad to face Real Madrid, in his last game against Leyton Orient in the FA Cup he made a big rotation to maintain the fitness of the main players.
In my opinion, Real Madrid will have a hard time in the first leg because Man City will try to take advantage of the Home game to put pressure on Real Madrid, especially since their defense is not completely solid.
FA Cup is not important with Manchester City and in many years, Champions League is where they want to focus most and win this title. This season is not different, and they will continue focusing on Champions League, as Manchester City know that with their quality, when they can exit the crisis, they can beat any strong opponents in Premier League and Champions League.