1. Diaspora had all the characteristics of vaporware for the longest time - I remember they were #1 in a HuffPo 'Top Ten Alternatives to Facebook' lineup in May 2010[1].
2. The source code released that fall seemed to fail Spolsky's second rule of being able to build in a single step, because I remember checking out the repo and then realizing that I'd need to dedicate more than ten minutes to figuring everything out, making a mental note to do that at some point,a and promptly forgetting about it entirely.
3. The officially-hosted version was a victim of poor timing - the first time I saw it was last summer (2011). Aside from the fact that this was more than a year after I had already seen it in a mainstream news source, this was immediately after the release of Google+ and at the height of the 'nymwars'. By that point, Google+ had already gained its reputation as a massive, overhyped soon-to-be-likely-failure[2]. Diaspora's UI was nearly identical to Google+, so it seemed less like an alternative to Facebook and more of an open-source alternative of an alternative to Facebook.
I don't think the technical spec of Diaspora as a product is broken at the core (though that doesn't mean that something like what you envision couldn't also be valuable as well). I do think that the end goal is worthwhile, and let's be clear: this does not kill Diaspora - it has every chance to be as much alive as Netscape is, just in a different form (ie, Mozilla/Firefox). That's the beauty of open-source projects, particularly community-driven ones.
[1] The lineup is of course indicative of nothing other than the fact that Diaspora was already hyped-up enough to be included in such a lineup!
[2] Whether or not you agree with that conclusion now, it was certainly a popular sentiment at the time.