I have also been to the SOS village in Malawi- a great deal of time and effort is put into creating a family unit for the kids and as has been said before there is a continunity of care after they leave at 18. Also the local community can use the facilities at the village.
I also went to see an Action Aid project which was essentially a mud hut in the middle of the village and provision for orphans to come and get a wash and get some food every day. There is an argument it was probably the more appropriate way forward as while SOS villages are fantastic, they can only care for a small number of kids and there are just so many orphans in Malawi. Small scale projects can arguably do more good over all.
As far as Madonna goes, I wouldnt want my child adopted by her. Money obviously does not equal a happy childhood, and in fact I personally feel a lot of money is deterimental. The people Mercy will be mixing with, the lack of need to go out and make your own way in the world, the easy access to drugs, the huge pressures on body image because of the press. Incidentally, in Malawi- 10 years ago and I am presuming its the same now in rural areas-, my backside was not big enough to be really attractive. If you knew me this would surprise you. It was blissful to spent a couple of years just not worrying at all about weigh. I also think from the point of view of personal relationships being the child of a mega star must be very fraught in terms of learning who you can trust and who is using you for money and connections.
I am not romantising African village life, there are many issues, especially for women, but Malawi is in many ways a lovely lovely country to live in - provided your basics are there, people who care for you, food, shelter and education. Malawians can provide the first, Madonna could easily provide the last 3 for thousands of kids.