I think he absolutely has to leave Real Madrid, it's a team that no longer wants him and isn't interested in having him play, he risks being forgotten and never playing again, I know it's difficult for him but there's a real rift between the club and the player, it's better for him to leave
Moving to another team could be the right choice for Rodrygo at this point, because he is no longer a main option in the Real Madrid squad. Especially after the arrival of several new players, his role has been replaced, and Xabi is still reluctant to give him a more central role and longer playing minutes. If he chooses to stay at Real Madrid, it is likely that he will only end up as a reserve player, which would be quite unfortunate for him. It would be better for him to make the decision to move to another club rather than waste his talent on the bench.
I don't know why Rodrygo still wants to stay at Real Madrid, even though he knows he's not a priority for Xabi. Even if he wanted to leave, Real Madrid wouldn't stop him. Currently, Rodrygo's future at Real Madrid seems over, and without much playing time, his career won't develop. So, it would be best for him to go to a team that needs him, so he can get more playing time.
Undeniably, Rodrygo is one of the best natural dribblers in football. However, unfortunately, he didn't perform at his best last season, and he scored very few goals last season. This is what made Xabi doubt him, and now his position is starting to be taken by Brahim and even Arda Guler. Furthermore, Xabi probably sees Rodrygo as not a reliable player as a main goal scorer, but he can sometimes be very reliable as a super sub.