Thing with Madrid is they really do need a load of players, and they can find backing to buy one huge player a year, but they can't afford to replace like the 6/7 players they need. They need strikers, wingers, right back, centre backs.
City have a real chance of bringing in the necessary players, but people are getting far to caught up in who they are buying NOW. They can buy Barry now, get them into Uefa cup at least next year, maybe Champs league the year after and buy another 10 players then if they want. Few clubs can replace a team now and again in 3 years. Barry for me might not be a first team player in a champions league winning side, but he'd be easily the quality you want as cover and rotation. So buying him, Bellamy, Kompany is more than enough to make them a european side and they are also more than good enough as cover/rotation players when they bring in even better players in a year or two. Smart players will know this, will have been told this, will have met with Hughes and the owner and realise the backing means thats a possibility.
Keep in mind that Alonso might prefer life in spain, he might love life in England and specifically like life around where he is now. No matter what people think there are choices to where to play football that extend beyond money and the quality of the club, he probably has family, kids in school maybe in England, english wife at this point(I have no idea, just guessing) and it might be in his interest to keep his family in England where his kids are doing well in a good school. Personally at this point in his position I'd be staying in the premier league rather than go to Real Madrid who embarassed themselves in the champs league and against barcelona. I'd take first team at City over being looked over under Benitez any day of the week, extra money, best league, real chance to push the club forwards and keeping family in a similar area are bonus's.
Now change that choice to Barca or City and things change a lot, Barca have a great team, they will compete for everything next year, Real won't.
THeres no reason City won't be competing for europe, poss even a champs league spot next year, and the title in years to come. Chelsea did NOT buy the title overnight, they were heavily in debt for buying big players for years on end, then spent HUGE money in the first year then spent even BIGGER the next year and got the title. Before the ruski's cash was injected the squad and team was FAR stronger than City were when they were taken over. A lot was spent(sven + previous owner), but on completely the wrong players, while Ranieri spent more money but on the players at the club who are still the best. They only made one signing last August, and he was their top scorer and had a great year. They're moving the right way, and fast.