I believe Real Madrid can reach a higher level with Alonso. Their rivalry with Barcelona in Spain will continue. Atletico Madrid is another Spanish team that could challenge them, but Xabi Alonso is a manager who shares his genes. He knows exactly what the team needs and what they need to do. I have complete faith in him and believe they can succeed this year. If they can establish a good balance of power among their star players, I think Real Madrid will have no problems. Carlo Ancelotti had trouble with this. From what I've seen, he's been overly tolerant towards his star players.
I do not share your optimism regarding Real. I think that despite all the transfers Alonso has made, I do not see any major changes in the team. Especially after the defeat to PSG, I can say that their defense still remains very weak. Yes, in that match the circumstances were such that Alexander Arnold suffered a minor injury and was absent, and the defenders who are recovering from injury also could not start. In fact, Real played with their old defense. But despite that, this defeat happened after all the transfers and improvements made by Alonso, so for now I am not sure they will be able to compete with Barcelona on equal terms.