To be fair to Xavi this team strength is the defense so playing defensively makes sense. Would be stupid of him trying to play something they can't do especially when missing most creative midfielder and two best forwards.
OTOH if Ferran would score that pen it's likely Araujo also wouldn't be sent off and this game would more likely end up 3,4-0 than holding onto a 1-0 lead. And we didn't really struggle too much playing a man down for half an hour either as Valencia is just too bad and had their only shot (well, more like pass to MATS) on target in 95th minute.
Same really in El Clasico. Real had possession but didn't create shit when we were defending deep. Why give them a chance and play to their strengths with a high backline so they could kill us on the counter attacks like it happened so many times in the past?
This team doesn't have quality upfront to score 4 or 5 goals every game so keeping it tight at the back is needed to win games but that alone doesn't automatically make Xavi a defensive coach.