diamond doesn't work on weapon quality, and it doesn't directly have an effect on DPS. diamond changes the values of all affixes on an item, except for set affixes and anything on an Eternal item. as @luisfsk mentioned, if you had affixes that affects your DPS in some way, when diamond is used, it is changing their values. so if you had attack speed +10.2% and +78.3% weapon damage %, using diamond might change them to attack speed +9.7% and +77.4% weapon damage %, lowering your DPS. if the values were maxed out, you would only be lowering your DPS. of course, there is a chance of getting higher values, up to an affixes cap/max, but diamond is very random. diamond should only be used on items with Legend and/or Crystal affixes. if your item is lower than 100, increasing the items level will increase the values of affixes a little bit, but this method is only good if you really want that weapon and don't want to have to make another one when you get to level 99.