I would prefer that a girl not be named Diana because of the comparisons but, on the other hand, why not? There are going to be comparisons no matter what. William loved his mother and has made it clear that he wants to honor her memory as much as possible (i.e., the engagement ring). It also may help the royal family move on. Eventually, people will eventually hear "Princess Diana" and think first of William's daughter rather than his mother.
If it is a boy, they may name the child Philip or Michael, but probably not Charles, as there will be two Prince Charles for at least a decade.