I think it is right to say that there were no obvious candidates for the England job, because there are two criteria that jointly exclude the top managers:
1. Nationality, i.e. English/British.
2. Track record at the top of the game.
The problem for England is that it is very unlikely that any Englishman is going to get a chance at one of the top English clubs because they are looking for criterion number 2 and aren't concerned with criterion number 1. This is a problem that seems to affect England more than the other comparable European nations of Italy, Spain and Germany, who are much less global in their choices. Part of the reason for this is probably entirely circumstantial: the success of Arsene Wenger at Arsenal has provided a paradigm of success that is right in front of English eyes. However there also seems to be a connection between the glut of foreign managers and the type of club: clubs such as Barcelona and Real Madrid, at the top end of the football franchises/clubs market, also have foreign managers. I don't think it is a coincidence that Spain mirrors England in this regard - the two nations currently have by miles the best 'elite' clubs (those clubs capable of winning the Champions League).
Anyhow, the net result of the fact that our top clubs are not willing to gamble on up and coming English managers, preferring managers who have already won their domestic league, is that there is not a clear route for our managerial talent to progress to England. France, of course, gets round this problem by ignoring criterion number 1, and so do Germany. This is despite the fact that each of these countries actually has a league where it is capable for the young, aspiring manager to rise to the top (cf. Paul Le Guen and Felix Magath.) Italy are the only European country which has jointly employed criteria 1 and 2, and we have seen the result. However I feel Italy's success was as much down to other factors, as to their new manager. These are primarily bribery scandal, which I think united the squad, and the number of Italian players in Serie A.
Given that we are not going to get enough (if any!) English managers with Champions League experience soon, I think that the FA is right to use the channel of prior involvement with the England squad. For the present situation Steve McClaren is the right choice. At least by selecting those with prior experience English managers will have some advantage, in terms of experience/knowledge, over their opposite numbers. The FA appear to be continuing this line with Stuart Pearce. However, as the RFU showed with Andy Robinson, this is not a failsafe route, and it is perhaps arguable that what makes a greater difference to an international side's success is the infrastructure. In this respect we are actually getting worse, with the relative importance of the international side seemingly diminishing each year. I fear that the manager will only start mattering when we start actually organising our domestic season around the international calendar.
Finally, lets hope that if another Brian Clough or Bob Paisley turns up we actually offer them the job!