Donadoni as a coach wouldnt be bother me in terms of him playing for Milan. Rijkaard played for Milan and coaches Barca, Ancelotti coached Parma and Juve before coaching Milan. So I don't think it matters.
Donadoni seems rather inexperienced though to take over a club who is the biggest in Italy, as well as one of the biggest in Europe. It just doesn't seem like a good move for the club. However, with new management, we may have to accept that the moves Moggi and co once made over the past decade are no longer around. So the smart transfer moves and non risks with younger players may very well go down the drain...could be good, it could be bad...we'll wait and see.
Vialli to me wasn't great as a coach. He coached Chelsea prior to the Russian owning them and spenind big. He won a couple of trophies, which was great for the club. But all this seems so long ago and you can't help but wonder where he has been for so long and what he has to offer as a coach these days.
Deschamps would be a good choice as in recent years he has done well for Monaco. His first season as coach was wonderful and he made a CL final, that is something that many good coaches have failed to do.
The on policy which has been around for quite some time is that Juve have Italian coaches...will this change under new management? I really hope so...i only see Prandelli and Speletti being decent enough to coach us, after them i think its foreigners all the way.