Madrid are stacked in CM position, Guti, Snejder, Gago, Diarra getting back De La Red. And if they might be interested in Diego, thats another central player. Dont count on them getting Xabi, seriously.
And unlike what you say, their signings have been pretty sensible for the last couple of years. They have done what we should do (with less bank account yeah), buy young talented players who are hungry for success, and gotten 2 league titles as a result.