You shouldn't have any problem with GSM & making phone calls, etc. I'm in the UK and it worked okay for me. If you read the installation section on the CyanogenMod 7 RC3 for Milestone link, it says the following:
“- the included RIL files are for the European frequencies, if you are in Canada, US, Lat Am or Thailand, you will need to replace them to get 3g working”
In your post you didn't say how you tried to install the Droid ROM, whether through openrecovery or the standard recovery.
If you want to install the androidiani-openrecovery as I recommended (which allows you to do a backup and other useful stuff), then you first need to install vulnerable recovery. This is a recovery program which is like the standard one but has a vulnerability (exploit) which enables you to install the modified open recovery.
The link to vulnerable recovery is found in the Vulnerable Recovery SBF Flash section of the following page:
sbf [And Developers]
and the file you download is called vulnerable_recovery_only_RAMDLD90_78.zip. When you unzip it you'll get an sbf file, vulnerable_recovery_only_RAMDLD90_78.sbf
The sbf file is flashed onto the Milestone using a Motorola program called RSD Lite. See the link to version 4.6.0 of the program on the following page:
tools:rsd_lite [And Developers]
If you search you'll find plenty of web pages describing how to flash an sbf file with RSD Lite. If you're running it on Windows 7 you may find that the sbf file isn't recognised by the program. This is due to a bug and a workaround is to alter the length of the filename. By experiment I found that if I called it vulnerable_recovery_only123456.sbf that gave the right number of characters and the Start button was enabled. Some people recommend using a short filename or placing the file in the C:\ root directory, but that didn't work for me.
Once you've flashed the vulnerable recovery, download the androidiani-openrecovery, unzip it and copy the extracted update.zip file and OpenRecovery folder and contents to the root directory of the phone's SD card. Start the phone in vulnerable recovery and apply the update.zip you put in the root directory. Then you can reboot into OpenRecovery, do your backups and install CM7.
Any questions, just ask but try searching the web first as there are plenty of good tutorials and forum discussions.