Spoiler

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You don't have to kill him, just tell him you look for Astral Dominae.

...just kill him..

Well, i disagree with the kill-first bit mostly because if you kill Milano, the Don will be hostile, and you can't Pick his Pockets. Which contain some lovely things he doesn't hardly ever drop, like Chamail +2 armor, Death Bomb, etc. And by the time you can kill the Don, Milano is like a very easy pudding for afters, so it doesn't matter he's still alive.