If you look at things logically, and not through the prism of a City or Arsenal fan, about 5 years ago there was a massive gap in quality between City and Arsenal, there wouldn't be a single Arsenal player even in the conversation of a combined team.
Over the next few years Arsenal started adding quality to the point that they ended up becoming City's rivals in the league. Then over the last couple of years City have dropped from 1st to 3rd, and I don't think it's outlandish to say that's because in these transition seasons the players they've brought in aren't as good as the players they have replaced, (YET) which were some of the greatest the league has seen.
So while I'm not a big fan of the combined XI chat, it would at least be debatable now when it certainly wasn't before surely?