Milan are clearly not in great condition recently. Their results with Sérgio Conceição so far shouldn't be misleading. They might seem like they are winning most of their games but you must have watched the way they play as well.
They haven't been playing that impressive honestly.

In nearly all of the games they won, they had to make a comeback. Just like the one they made against Parma the last time. The last 2 goals came in the stoppage time which was too extra.

This is the odds for the Derby della Madonnina. Would you trust Milan against Inter now? I wouldn't honestly. Instead, I would go for my mostly preferred betting option recently,
BTTS & over 2.5 goals @2.10.

We should not underestimate AC Milan when playing against Inter Milan, since they have defeated Inter Milan twice this season. Ac Milan won the first league game 1-2 at Inter Milan's home field, and they also won the Supercoppa Italiana with a comeback that included three goals in the second half. AC Milan's performance under Sergio Conceicao has been inconsistent, although they are doing better than they were under the previous manager. This is a derby match between AC Milan and Inter Milan, so one should avoid betting on any team to win. I agree with your prediction since both sides will never play without scoring a goal against each other.
Agreed. Derby matches are always different because it is a matter of prestige between the two teams, so even though Inter is more consistent than Milan, it does not mean that Inter will win this match easily. Moreover, as you said, this season Milan has beaten Inter twice and this is certainly not a coincidence or luck but this is the result of solid teamwork. If AC Milan has a tough opponent, their performance will definitely be different, especially when facing a derby match, they must have prepared a surprise to be able to beat their rival.
Betting 1x2 on this match seems very risky because both teams have the same winning percentage. However, both teams will score in this match, so the over bet seems safer. I am sure both coaches will apply an attacking strategy in this derby, especially Conceicao has great ambitions to restore AC Milan's performance to its former glory. We can see the seriousness of the management in supporting the coach by bringing in players according to his needs.