"Yes, we should do what you are suggesting, with these refinements"
That would only work if the proposed solution was somewhat close to being viable. But if the only way to succeed is to throw the existing solution out and start from scratch, it's hard to find a diplomatic way of saying so.
What I find usually works is working back from the proposed implementation to the goal that it is supposed to serve. You can usually do this in a validating rather than rejecting way. Once you've identified and validated the goal you can address cover a with the proposed approach and present alternatives without the proposer viewing it as a rejection since you got to common ground on what you are trying to achieve before proposing alternatives.
Often the problem with an initial "no" to a proposal is that the proposer identifies the proposal tightly with the purpose and suggesting an alternative to the proposal without validating the goal reads as rejection of the goal.
That would only work if the proposed solution was somewhat close to being viable. But if the only way to succeed is to throw the existing solution out and start from scratch, it's hard to find a diplomatic way of saying so.