Regarding the coach, Dorival Junior is a renowned Brazilian coach and in my opinion I think he can lead Brazil better than Diniz, but I believe that Ancelloti could become a game changer because he's a coach with extreme quality and reputation, but unfortunately he didn't go to Brazil.
Brazil will have some friendly matches in a few weeks and in a few months Brazil will play in the Copa America, after all, after these games we will be able to see what the level of the Brazilian football team will be.
It must be really sad to hear when Brazil first heard about Ancelotti's decision to extend with Real Madrid instead. Many news sources wrote it like Ancelotti has already agreed with Brazil first. It was so persuasive that I was also thinking like there was such agreement until his new deal with Real Madrid was announced.
Ancelotti might have changed the Brazilian coach tradition in a positive way too in my opinion. You know how successful coach he has been with various teams in Europe. The only doubt I have is about his not managing a national team in his career yet. But we will never find out if he ends his career without managing one.
I think even if Ancelotti didn't extend his contract with Real Madrid, still, Brazil couldn't be his next destination and the reason is very clear if you check the former coaches in Brazil. They usually had a Brazilian coach and they tried to avoid using any non-Brazilian coaches because they thought Brazil was the country where they are better football players and coaches and even other countries should use their coaches mostly because of the performance of Brazilians in the past world cups.
That's why I think even the new coach of Brazil, Junior, who is totally unknown to me can't help this team because don't have the knowledge for it.