House Diedne did not really exist. It was purely a (very successful) Tytalus invention to foster conflict. With a cabal of Tytalus magi keeping the thing going (while fighting against each other on both sides, naturally), of course the war took a long time to resolve.
Probably they got bored, and the cabal that said, "Hey, wouldn't it be cool to give the Quaesitors real power and nudge them to enforce the Code so extensively that it would become impossible to get anything done without breaking the rules," won ascendency.
Actually it was Stan the Tytalus, a magus who had grown excessively strong due to powerful gifts from a faerie god and his elves. He even managed to corrupt the few Verditius with hubris low enough to still understand the gift of giving. This is why, even today, those who give their sodales enchanted devices for free are viewed with suspicion.
After the Schism, there were fears that that-god-who-shall-remain-nameless would find another Stan. Some Jerbiton conspired with the Church to render him impotent. That's why he got repurposed as a saint by adding Klaus to his name.
They just got bored of playing hermetic games and left after convincing the rest of us that we killed them. These are the same guys who erased the language of their last enemy after all.
You know, I am starting to like the conspiranoid versions presented here in jest about the diednes more than the official line on them. The idea of them being a Tytalian game is just great.
I'm not so sure that China would eat Diedne whole.
Leaving aside the Mongols for a bit /2...
Although China has a tendency to assimilate invaders by force, they themselves have been susceptible to and changed by outside cultural or religious movements, such as Buddhism. The Diedne could do very well in China, although telling a Dragon Sorcerer to "join or die" might not be conducive to that. The Diedne would have to make some changes too, but they would have to do that anyway upon leaving the Order.
Of course, I think the aggressive 5ed Diedne are a lot more likely to have joined (or even organized) the Mongols than the Chinese, and do some devouring of their own. If Genghis Khan had a Longevity Ritual, the Mongol invasion of Europe might have ended very differently!
(FWIW, an asteroid passing by a black hole has about the same chances as it would passing by a star of equal mass at the same distance.)
Diedne did exist and she helped Bonisagus develop his theory of magic, but she died shortly afterwards under unknown circumstances. Tytalus found this very convenient and impersonated her.
Diedne did not exist as a real house. They were Tytalus persona. Volume was created using more persona, ruses and fakes. Demons were VERY happy to help create this ruse with False Gifts and the like.
The Tytalians were already in league with Satan at the time. they used their acquired new powers to simulate Diedne and act like total jackasses. Well, not in league according to themselves. They were just dealing with demons in the same way that they were dealing with other spirits. Demons were just more useful for token prices.
The Tytalians impersonating the Diedne made a point of doing EVERYTHING that would annoy Tremere and the followers of the kiddo. A win-win escenario according to the Tytalus.
The Betrayal process forced some of the Tytalus to assume their Diedne personas permanently.
When the war broke out the Tytalus played both sides and also used magic to confound their opponents, so a lot of the time they were fighting powerful spirits and demons instad of magi. Or were fighting against each other due to magics that made they believe that they were facing diedne. Both of them. So even in scenarios where the Order "won the battle" there were heavy Order casualties.
The Shadow Flambeau developed in part from Diabolist Tytalian/Diedne apprentices taken from the defeated house.
The Guernicus got empowered by the non.-diabolical tytalus to smahs their diabolist opponents (not that they think they being diabolist is problematic per se themselves) for the leadership of the house and to create an interesting playing field after the end of the first Big Game of the Order with the destruction of their house diedne design. The "we will come back!" statement just makes tytalus laugh so hard nowadays and well, they might decide to play the game again in the future....
The Duresca scrolls were planted in Duresca by Tytalus agents. It is a saeguard for them (they also have copies) in case the Guernicus empowerment becomes a less interesting game and they have to change the rules to make it interesting again.
Oh, and obviously the letter published in Sub Rosa #13 is true, and Damhan Allaidh was Tytalus the founder and he was hunted by Flambeau and her apprentice among others. To avoid the schism this would have caused Flambeau's name was changed to Ignes Festi and Tytalus' to Davnalleus in the official records.
It even works if the corrupted Tytali didn't create House Diedne until their corruption was exposed. If they're in league with demons, they can arrange for a lot of manufactured ignorance. They might also be able to cast grand rituals against the Order with a duration of Sin; that is, the ignorance persists until the Order as a whole renounces its sinful ways, repents, etc... something not likely to ever happen.
/2...