TBH they've always looked a bit unbalanced in midfield since they sold Makelele.

diarra and essien are both very nice players. personally i love them... but they can't give to a team the same contribution the likes of makelele and cambiasso can (both ex- real madrid players, both of them gone for free... wich says a lot about real's management skills).
diarra is a fantastic defensive midfielder, with a very good shoot... but he can't do much more than this.
essien is a magnificent all-around midfielder, balance, stamina, shoot..... but talking about defensive midfielder's duties.... he has some serious weaknesses (i'm talking about his marking ability mostly). i know many of u will think i'm crazy right now, but, just take a look at his feet position when he's on a tight man marking, and u'll see what i'm talking about.
claude is a fantastic defensive midfielder.... but he was also much more than that. he gives timing to the plays, he gives the rhythm to the whole team, he has the ability to tune up the team's plays. theese kind of players are extremely hard to find, and are usually the best assetts of the teams they play for, coz they have the ability to set the tone of the plays, the ability to turn an average team in a good team, a very good team in a great team (just by themselves).
Many people in england didn't really appreciate this great feature of claude, but that's because the pace in england is just too high to appreciate those things.... and most important, the pace in premiership never changes; it's always the same, wich makes pointless to have a player who can change the tempo of the game (got to say however the british top teams are starting to change the way football in seen in england lately).
in Spain instead the changes of tempo are extremely importants, as the rhythm of the game is not really high usually.
so having a "metronome" on the centre of the pitch makes all the difference in the world.
real madrid lacks of something right now. but their real issue doesn't concern the players... with the roster they have, schuster can still count on a huge load of quality and depth.
their real issue is their football, their mentality.
to be a winning team, u have to play good football in both the opponents half of the pitch and your own half of the pitch. u have to play as a team, not only in the opponent's box, but also in your own box. u can't expect to win matches, with such an unbalanced display, unless all your players have a great off-the-ball movement skill (and real madrid players don't).
u can't expect to win football matches displaying your whole midfielders beyond the midfield line (and both the fullbacks on the midfield line), just coz u have the likes of cannavaro, pepe and casillas protecting your ass. football teams in europe attack with 5\6 players today, so 2 cbs and a great keeper just won't be enough (no matter how good they are).
i mean look at cannavaro's performances. since he joined the merengues, his standards went down...... and that's exactly the same thing that happened to samuel before him.
real madrid bought samuel from roma; he was one of the 3\4 best cbs in europe those days.... then he joined the galacticos and he suddenly became crap..... but when he joined inter (after just 1 season), soon he was world class again.
the real problem is not the quality of the defenders, it's the way the team plays.
some might say "hey but till a couple of years ago this system used to work"...... yes that's true, but that team could line up zidane, figo, raul and ronaldo (all in their primes) all together.
van der vaart, snejder, robben, higuain, they're all great players..... but honestly they don't frighten their opponents aswell as those monster used to do.
and let's not forget that makelele was behind those monster, giving some logic to that crazy team.