i reached the final 4 times in 8 years with arsenal in fm07... lost 3 on penalties after dominating, and lost 6-0 to man united after going on holiday for the six games before the final (assman messed up form and morale, the bugger). 3 of the finals were against united.
the last was against lazio, but i saved before the final. so what i did was save the loss under a different gamesave name, and reload the original game and replayed the final. lost the second one, so i went back to the post final original save (i just wanted to see how different tactics worked).
in fm07, i went 4 years without winning anything at real madrid, then i won the champions league in my 5, along with the spanish cup, and went on a domination streak for the next two league seasons. having not won the league previously, i won back to back titles by 20+ points, winning 37/38 home games.
so it seems that winning the champions league makes your team super invincible, so the game won't allow itself to be dominated
saying that, i've won 2/3 titles at arsenal in fm08 and haven't reached the semi-final stage of the CL yet.