Mahrez definitely didn't come out of left field - the much maligned Sam Lee wrote about how he wasn't happy etc. I would be extremely surprised if City weren't aware of it as well. Regardless, he's been gone a few weeks now and we haven't replaced him. Gundo has been gone longer and we haven't replaced him - Kovacic wasn't an intended replacement as we had interest in him regardless of Gundo. Hell, we were after Bellingham regardless of Gundo leaving.
Paqueta isn't the be all and end all - he's a good player who could become great under Pep. I get the consternation about the fee and why we would pull out but it's quite a poor situation to be in and KDB's injury just exacerbated the risk of having a smaller squad. We have a few players in the squad that Pep either doesn't trust, are inexperienced or potentially not up to standard. He can do miracles but it would be great to follow up the treble without him needing to.