Yea it won't be a surprise to me if they beat Real Madrid in the champions league because apparently Atletico de Madrid is in a good form this period or let me say this season and Atletico de Madrid beating Atletico Bibao yesterday was really a big sign that they are up to something because right now Atletico Bibao is among one of the strongest club or team in La Liga. Currently, Atletico de Madrid is toping the La Liga table though Barcelona haven't play there match and so what will determine if Atletico de Madrid will still be at the top or not is if Barcelona win, draw or lose which i think Barcelona may not want to lose even though they have champions league to play and Real socidad is also a strong club they can be very stubborn at times.
Beating Bilbao in La Liga has nothing to do with the UCL match against Real Madrid. I'm sure Real Madrid can play with a better performance when it is in UCL match. I know Real Madrid was defeated by Real Betis in La Liga, but I don't think that the sign for the defeat of Real Madrid in UCL. Moreover, the first Leg will be in Real Madrid home, winning in the first Leg will be always crucial. I'm very sure Real Madrid will try all out to win the match with some goals, so they will be quite safe for the second Leg in Atletico Madrid home. So, I'm optimistic Real Madrid is still the favorite team to win in this match although Atletico Madrid is in a highest position and performed better in La Liga.