Barcelona need (as much as a team as good as Barcelona could possibly need anything) another top class forward, winger, wide forward, inside forward, etc. Someone else with a bit of oomph and a top class goalscoring threat basically. With questions over Villa and the lack of an Eto'o, they're dependence on a Messi that can sometimes look a bit static and disinterested can leave them looking a lot more predictable than the team that twatted us a couple of years ago.
I can see why they're supposed to be interested in Neymar. I can't really say I know how he's fairing currently, but they need a bit of a goalscoring/creative injection on the wings/in attack to supplement the whole Messi machine. That's not to say that goals are coming from Messi and nowhere else, but it all seems less potent and varied in their approach currently. Messi has completely changed his style of play over the course of the last two/three years and in a way they've lost some explosiveness and variation because of that.
The 'decline' makes sense looking at that last factor with the new Messi, the lack of an Eto'o, the uncertainty with Villa and the inferior Xavi (and the subsequent impact that has had on a team in my opinion that has visibly been different in style in the first place with Villanova). Barca's brilliance in that all-conquering year came from being able to assert complete control of a game whilst also having the variation to destroy a team as well as strangle the life out of them. With Vilanova I'd say there has been at least a noticeable shift away from the complete strangling of opponents towards a slightly greater emphasis on quicker tempo football, but at the moment they lack the players to match the 2010/11 team in either style.
They're still almost certainly the best team in the world though, and if Milan knock them out it will be absolutely fantastic news for ourselves and the rest of Europe.