$170k = 4 young inexperienced people for a year to take on Facebook, WRONG.
This should be thought of an open source project, they should use the $170k to coordinate a large open source project to create this with experts from all over the web. I'm talking 40-80 regular contributors, 400 or more causal contributors. This is perfectly possible given the press they have gotten so far.
They need a leader, it's not clear to me which of the 4 is that leader, but they need one.
Also, whilst their eventual goal might be to take on Facebook, this is 5 years off at least. Facebook spent 2 years only in colleges and universities to get critical mass. Diaspora could try the same or work with niche interests like Ning does or do company social networks like Yammer do, to get started.