In Kingdom Hearts 1, can I use healing items to revive Donald or Goofy when they are downed with 0hp? Or do my party members need to be alive for me to heal them?
Yes, you are able use potions to heal downed party members. Using a potion will revive a downed party member with 30HP (or the HP with whichever type of potion you use).
I went ahead and verified this myself. I entered combat and let Donald fall to 0HP. When this occurred, I was able to revive Donald using a potion.