We investigate the formation and evolution of satellite galaxies using smoothed particle hydrodynamics (SPH) simulations of a Milky Way (MW) like system, focusing on the best resolved examples, analogous to the classical MW satellites. Comparing with a pure dark matter simulation, we find that the condensation of baryons has had a relatively minor effect on the structure of the satellites’ dark matter haloes. The stellar mass that forms in each satellite agrees relatively well over three levels of resolution (a factor of ∼64 in particle mass) and scales with (sub)halo mass in a similar way in an independent semi-analytical model. Our model provides a relatively good match to the average luminosity function of the MW and M31. To establish whether the potential wells of our satellites are realistic, we measure their masses within observationally determined half-light radii, finding that they have somewhat higher mass-to-light ratios than those derived for the MW dSphs from stellar kinematic data; the most massive examples are most discrepant. A statistical test yields an ∼6 per cent probability that the simulated and observationally derived distributions of masses are consistent. If the satellite population of the MW is typical, our results could imply that feedback processes not properly captured by our simulations have reduced the central densities of subhaloes, or that they initially formed with lower concentrations, as would be the case, for example, if the dark matter were made of warm, rather than cold particles.