Could it be that the police investigators were from another area, an area which was predominantly Portuguese speaking since after all, the country was Portugal?
The staff interviews appear to have been conducted in the main by 11 PJ officers drafted in from Lisbon.
I don't think the language barrier arises because of this but rather how much chance they have to converse in English. I would expect the bulk of PJ officers to be involved in Portuguese-speaking cases, and I would expect them to socialise with other Portuguese people. Therefore any English learned would decay through disuse.
GNR officers on the Algarve are somewhat different. The coal face officers have, in my personal experience, been able to hold simple conversations in English, though I will stress the 'simple'. Presumably they get enough cases in English to retain some capability. As soon as they move away from the coal face, I would expect their English to decay through disuse.
That leads us to the 2 chappies responding that night. They were on night patrol in Odiaxere, and the GNR covers the rural areas of Portugal. I believe Lagos has a PSP force, but it doesn't really matter. Outside of Luz, where English is the dominant language, the area is predominantly Portuguese speaking.
The McCanns got 2 chappies more comfortable speaking in Portuguese with a translator on hand. It would have been weird if they had chosen to converse in limited English.
Luz speaks English. The McCann experience of Luz was English. The OC speaks English. The McCann experience of the OC, staff and guests alike was English.
So a search was NOT hampered by an inability to speak Portuguese, NOR is it reasonable to deduce that the McCanns thought it would. They had never hit a Portuguese barrier before.