Unlike other coaches who treat some of their players as friends, Pep sees everyone as a tool, that's why he can dispense of anyone without remorse and still maintain momentum.
This, just as you stated is where he fails as a manager because when the going gets tough, the players don't have an extra motivation to give more, they just stick to the system and it's limits. Pep's players rarely see the game as a game of life and death.
Personally I don't see him changing
Yes, you get the point. Pep needs to build the character in his team if he has any intention to win the mental game.