I think a 442/352 transition perfectly suits the squad as it currently is.
It would maximize the use of both our young strikers, let us use Foden in more spots, and limit Cancelo's liability potential.
Best way to do this is make Rodri/Phillips one of the CBs, and play CBs in the fullback position and go 442. For example:
Ake/Laporte
Dias/Stones
Rodri/Phillips
Walker/Akanji
Grealish/Foden
Gundogan/Bernie/Foden
KdB/Bernie
Mahrez/Palmer/Cancelo
Haaland/Alvarez/Foden/Palmer (2 of these)
Pep loves to defend in a 442 when needed but also loves to press in this way, so this is a natural shape for the squad.
The most important part is how the squad progressed from this in possession play and how easy it is, very often, squads tilt asymetrically to the right of left to make a back 3, but there is another way, push a CB forward, in this case if we push Rodri/Phillips in the midfield during possession play we get a 352. And if one of the second strikers drop (Alvarez, Foden or Palmer), there is a very easy 4 man overload in midfield to make.
The choice of the wide players is also interesting, as I think there is a good choice to make depending on the tactical situation:
1) The opposition is sitting back mostly and pinned back, there is very little space behind and intricate passing is needed more.
Then go with Foden and Cancelo outwide (classical wingers) with Haaland and Alvarez up top. There will rarely be space to play between the lines in these situations and we will need to rely on high volume chances being made, it makes sense to have both strikers there and classical wingers for delivery.
2) The opposition is likely to try and play football, transitions are now useful against them, possession based play is required in build up.
In this case we don't go 2 strikers, play Foden/Palmer with Haaland/Alvarez to overload the midfield and give us control.
The wingers could probably be the same, but also the inverted wingers in Grealish/Mahrez/Palmer might be better against teams where space is available, this one is a toss up as I don't think it's clear which option is better on the wings, but the center makes more sense.
I believe this is a strong way to setup tactically and personnel wise.