The connection to Niall of the Nine Hostages doesn't fully rule out descent from Clan Donald - well, maybe clan membership as opposed to biological descent. The clan were mercenaries at that time, and if Niall needed warriors, the McDonalds were happy to rent out their army, if they happened to be on good terms with them at the time. If your County Sligo ancestors were Catholic, there's a very good chance they settled there as "retired" Gallowglass warriors as things became more civilized. Whether the non-paternal event happened before or after would be something to investigate ... were they McDonalds with an interruption to the paternal line, or locals who took the McDonald name after joining that army?
Check out the Gallowglass project on FTDNA for more info, and the Clan Donald DNA project, which has this to say about M222:
The group ... is centered geographically in northwestern Ireland. It is always referred to as the 'Irish' or 'Niall' group. Clan Donalds with this genetic signature may be descendants of Colla Uais; descendants of the O'Neill; or O'Donnell kindreds with whom we regularly served in Irish military operations; the O'Cahans from the Dowry of fighting men provided to Angus Og [McDonald] upon his marriage to the O'Cahan's daughter or descendants of Colla Menn from whom Gillebride sought assistants to recover his lands from the Norse.
This group is in addition almost all M222-S658-DF104-DF105. The age of this group is very roughly 2700 years [i.e., much older than Clan Donald].
(My family is I haplogroup, so I've done a lot of research into the distinctions. We are likely descended from Gillespies also associated with the clan.)