You are contradicting yourself when you say things like (Whilst City have a quality squad filled mostly quality players) and (City's players tend to get overestimated IMO), or when you say (surrounded by only quality players), you have to make up your mind here, are City players quality or are they overestimated?
Also, Pep's system alone can't make a player a quality, we know that players like KdB, Gundogan, Rodri, Dias, Stones, Haaland are WC and top quality, but players like Kova or Grealish or Ake are not as good as the aforementioned ones, so while you are right that a dominant system like Pep's might make a player look good, the system itself won't be dominant if there wasn't set number of quality players in the spine of the team, Ederson, Dias, Walker, Stones, Rodri, KdB, Foden and Haaland form that spine sprinkled with good to decent players like an Ake or a Kova or Grealish.
You cannot disqualify Dias' ability because he is surrounded by great players, you can't say Vidic was not a top CB because he had Rio, Evra & VdS, and Carrick around him, I am not comparing Dias & Vidic, just that your logic (CB plays with awesome players around him so he is not necessarily that great) does not hold water.
Dias arrived and immediately showed why City paid him big bucks, he simply showed that he is an excellent defender, in terms of tackling, interceptions, reading danger, blocking shots and crosses, heading, bravery, etc..., there is also his leadership qualities, since his arrival and whenever he plays, you feel City is defensively solid when they are under the kosh which does not happen that often, even in 1v1 he is solid and can deal with tricky and quick forwards, he has shown in several seasons why he is considered one of the best CBs in the world, and especially when VdV was out of commission due to his knee injury, he was considered the best CB in EPL, you say the chance to get humiliated is absolutely there with Dias, but it is also there with any top CB, VdV was humiliated even in his heyday, no CB survives that, but that does not make Dias less or anything like that.
damn mate you made defend a city squad

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All jokes aside, I really rate De Ligt, he has the requirements to be a top-class CB with us, good age, great experience in Europe (CL, Italy, Germany), potential and other things too, the finances involved in getting him here is not crazy, so I am for this deal, EtH knows him well which is a plus, I think it will happen.