They should be illegal, I know that much.
Nonsense. It's not incredibly common, but there are definitely scenarios where embedded districts can be the most fair outcome. Jacksonville is a good example.
It's not the case in Jacksonville, nor anywhere else. A donut is not a community of interest.
it can be. The suburbs of a city can absoletely be a COI.
Not by any...seriously defined CoI metric. Suburbs share a COI with the city itself, barring extreme circumstances.
Historic examples;
Las Vegas vs. Not Las Vegas (1990s)
Maricopa vs. Not Maricopa (1950s)
Denver vs. Center/Northeast Colorado (1920s - 1960s)
Jacksonville vs. Suburbs (1960s)
Pittsburgh vs. Allegheny county (1870s) *Possibly the lines are hard to tell
All of these are very valid encirclement imo. Especially in the case if you can make a county vs. rest of the county type deal