Age is just a number for Modric, he is still capable of playing at a high level and contributing to Real Madrid. Now that he has recorded 10 G/A this season, I think keeping him for one more season wouldn't be a bad decision for Real Madrid as his experience and ability can have a positive impact on the team.
Real Madrid did not remain silent after their eternal rivals managed to get full points, a 2-0 win was enough for Real Madrid to equal Barcelona points tally.
The points obtained can indeed be easily equalized by Real Madrid, but Barcelona still has more goals so Real Madrid still has to sit in second place even though they won by two goals when hosting Girona yesterday. But on the one hand I also quite agree with you on what Modric has done in the match because if Real Madrid does not find a replacement that is quite comparable to Modric, of course keeping him for another season is still a wise option for Real Madrid. Because as we have seen together that Modric can still have a great influence in Madrid's important matches this season.
Ancelotti seriously need to strengthen the squad during the coming transfer windows, although he may not since we saw that he didn't bother for it this January transfer window, when some of his men returned back from injuries but unfortunately injuries woes still showed up after the transfer window and this is among the reason Barcelona has been able to catch up with them this season.
Modric is aging like fine wine and I think he would want to remain at Real Madrid and if possible retire there but its up to the club to decide in the end. I hope they can even get a good replacement for him, who won't find it hard or long in adaptation to La Liga football or their style of play.