Can the Milan metro carnet be used by two people? I understand it's one magnetic ticket. Can it be handed back to another person to use?
No. One ticket person.
You can't share the carnet, but when we were just there we got two three-day passes. They paid for themselves in no time.
The machines will refuse two swipes within a set time of each other, I don't remember how long (20 minutes maybe) at the same ticket barrier.
You might want to consult the official Milan transport site fares page for a complete list of fare options and restrictions; it in any case confirms what the others have written: each passenger must have their own ticket, whether it be a single fare ticket or a carnet. A small consolation: relative to other cities, at €1.50 or less, the fares are cheap (they're subsidized, you're only paying part of the cost, the idea is to reduce the air pollution created by cars).