Nearly every El Clasico game where Mourinho has employed these tactics has ended up backfiring though. There is a fine line between making frequent niggling fouls and outright manhandling a player and most players end up on the wrong side of it eventually during a match. It was a strategy that will work maybe 3 times out of 10. As you said, keeping him wide and isolated would have worked a lot better fouling him only when absolutely necessary.
People seem to forget that there's a reason unsportsmanlike conduct is so loosely defined in the rules: it's so that when refs come across situations like this, they can act according to their own judgement.
Honestly, if they had just played it down a bit they probably would have gotten away with it. The real issue was that not only were they fouling Hazard constantly, it was that they were doing it so brazenly that any ref with a bit of self respect is going to become annoyed that he's being played. They were being that guy, the one who makes a big point of how the rules don't explicitly say he can't bring his own clubs with him to crazy golf.