You mean the Milestone as the non-CDMA aka GSM version of the Droid - right?
Well it can - thanks to some absolutely brilliant programmers.
You're better off looking here:
Motorola Milestone Android Development - xda-developers
If you're on a Telus/Canada Milestone it's a little more involved due to the radio files being different, but if you have an Asia/pacific or Europe or UK version (maybe even South America) - it's now been made fairly painless.
I'm on a "stock" UK Froyo ROM now, overclocked to 1GHz and it flies.
You can also have a try at the other major Froyo custom ROMS that have been ported such as the famous Cyanogen, MIUI, Cronos and others.
Good luck with it.