You bring up some good points especially about him not being especially skilled at creating his own space.
That is precisely why I don't like him at Barca, a counter-attacking team is the perfect fit for him. As you pointed out he needs space, and counter-attacking teams can create that.
Barcelona are obviously the polar opposite of a counter-attacking team, we love possession football and short passes, Bale wouldn't truly be able to fulfill his potential in this sort of environment, where he tends to become stagnant. I hear you on him getting the space by playing from a deeper position, but that LB position you are talking about doesn't exist in this Barcelona team as long as Alves is still here. Even in our 4-3-3 formation, we really play 3-5-2 or 3-4-3 during game-time ( due to Alves camping in the opponent's half), with our 'LB' really playing as a LCB. This is precisely why Abidal was ideal for us, he is an excellent LCB, and had no problem defending in the central area. Even if like you say we managed to improve Bale's defense he might become decent at fulfilling a LB's defending duties, but I can never see Bale being a reliable LCB at this level of football, its just not him, its not his game.
Not to mention if we brought him here knowing his defensive liability with the mindset that we will 'groom' him into a reliable defender, it means we are purchasing an incomplete package, while paying the price of a complete one. I'm not a huge fan of doing that.