You havent described what that "right formation" is. Tell me how we should have played in terms of formation, player selection and game plan bearing in mind that Vucinic and Vidal were missing in one game each. You have not offered an alternative yet.
The main idea of Conte's 3-5-2 is that when in a defensive phase you have 5 people at the back who can win back the ball and support the midfield as we start to go forward with the ball. The wing backs then go all the way up the pitch to stretch the opposition defense by hugging the touchline (meaning their full backs have to go wide to meet our WBs). When the opposition defense is stretched the strikers can occupy the box rendering making two scenarios possible:
1) the opposition CBs to stay very deep in the box and closely mark our strikers to avoid our STs from getting crosses. When this happens, suddenly Vidal and Marchisio have a lot of space to either shoot from distance or get a penetrating pass from Pirlo or do one-twos with each other.
On the other hand, the second scenario (2) is that the opposition CBs do not closely mark our STs as to deny our CMs the space for doing damage described above. The wingbacks can then launch crosses to the unmarked STs or Pirlo plays a lob ball over the defense to either a CM who made a run or a WB that manage to move inside the box without his marker.
Pirlo was pivotal for this strategy to work since he has to spray the ball to the WBs at the touchline and make himself available to them when they cant find a way in and give it back to the CMs or to the other WB on the other side who has more freedom. He makes sure we continue to have possession and can shift from Asa to Licht or to the middle until we find the point of entry. When that point of entry is found then depending on the scenario, he either send a ball over the defense to a running marchisio/vidal or he engages in one twos with them.
Thats a simplified description of how Conte's 352 works. Against easy teams, the oppositions sit back and have almost everyone defending in which case we continued to try the right side then the middle then the right again until we found an opening (snoozefest games). Against good teams, that strategy continues to work because our midfield could always win the possession game and apply the strategy and they werent so determined on defending all game the way minnows are.
Against Bayern (which were machines), we couldn't win the midfield battle at all because of the superiority of their players and how hard they pressed us. They pressed us from the back and for the entirety of the two matches.
We were wary of going forward too much with our WBs since they had fantastic wingers overlapping with the best full backs in the game keeping our WBs busy throughout and fearful of their unstoppable counter attacks. Going forward, we also could not win any of the one on ones since the entire team did not have any dribblers. Licht and Asa could not get past Lahm and Alaba. What rather happened is that Bayern won back the ball in almost every one on one situation close to the touchlines. The same happened with out CMs. Mandzukic kept running at Pirlo whenever they did not have the ball so that he doesn't have time to think. Schweini and Javi took care of our CMs and kept them defending throughout the game. Despite all of that we did manage to threaten their goal on multiple occasions and the goals we conceded were largely lucky. In the home leg (in turin), they scored off a rebound from a freekick (second goal was good). In the Munich leg, they scored off a lucky long range deflection in the first few seconds (effectively ending the game mentally for us since we had to score 3 goals without conceding just to go to penalties) and a Buffon mistake. Look up the highlight and goals if you have forgotten.
Once again, 3-5-2 made sense both in serie A and in Europe because it is the formation that utilizes our CMs qualities the most. It is a midfield based formation that requires Wbs that can defend and run up and down the pitch all game (they stretch the opposition defense). Had we won that midfield battle the way we did against Chelsea we would have won but they simply won every player on player battle. When your best players are the CMs you play to their strengths.
If you play an attack based formation then you are looking for a miracle from Matri and co. They have to do most of the attacking work in the 4-3-1-2 along with Vidal. Pirlo would have had to sit back and have a limited role (like last season), Pogba had to start the game and Vidal would have been played out of position (and we saw how poor he was in that AM role). Mind you, Vidal was missing in one of the two legs so that wasn't even an option. Furthermore, we didn't have players for the 4-3-3 at all let alone good ones.
The comparison to the madrid game (it wasn't you who made it) is off the mark since Madrid deployed a 4-3-3 and their fullbacks are purely attacking ones. The whole game is on the flanks and so out of necessity Conte had to deploy marchisio out of position as a winger. We did not have to fully rely on our midfielders to do the work because we had Tevez and Llorente, the former of which can create something for himself out of very little and the latter can receive long balls or convert headers. The idea was to neutralize their attack and hope our strikers can do something. We could not do this if Matri is leading the attack next to quags.
It almost worked. For it to have completely worked out we needed a perfect error-less game and sadly that was during the period when brainfarts were the norm and Conte did not help the team handle the pressure well at all.