Dominant clubs are annoying, and if their dominance is based on dirty dealings, then this increases the irritation tenfold. We can hope that City players will be on their minds already in the game against Real Madrid and Arsenal will earn at least a draw in this game.
I am not convinced that the City players could be distracted by the upcoming game against Real Madrid. There is Pep Guardiola who understands like nobody else how to direct the focus of his players to the single task that is ahead of them and then there is this endless experience playing on the maximum level almost every single game. This may apply to less experienced teams and players, but I don't think that the majority of the City players could lose focus or are less focused than they normally are because there is this clash against Real waiting for them. But still Arsenal has a chance to win the game. City is amazing, but they are not magically protected from losing games.
In general, yes, they are all pros (and I’m not just talking about City players) and essentially for them the whole season is an endless series of games and they are all important and in the end everything merges into one endless match. Therefore, in virtually every game everyone shows their average level. But the game with Real Madrid, especially in the quarterfinals of the Champions League, is very different from all other games, so I think that no matter how hard Guardiola tries, the players will think about this game not only when necessary (immediately before the game) but also long before it.
Oh sure, no doubt about the fact that a quarterfinal against Real Madrid gets players thinking differently and more frequently about that game than a quarterfinal against Porto. But I tried to convey that during these 90+ minutes against Arsenal I am 100% convinced that the Real Madrid game has no influence. I would go even further and say that a game against Luton Town could be more problematic regarding the players' focus because it would seem less relevant to play at 100%. In the game against Arsenal, I don't have 1% doubt that any of the Manchester City players are fully dedicated with their minds to that particular game and nothing else. It's because there is something on the line. Actually, it would be the same against Luton Town because losing 3 points could break them the neck either way, no matter who the opponent is. But I think for top players it is easier to put full focus on the tough games. Arsenal is a tough game, and no need to elaborate on what Real Madrid is.