I am sure the hotel is acting within the rules. I have read about it here on FT but that has mainly been hotels in the USA. I am not happy to hear that it is spreading to Europe. At least give the diamonds the choice..... so they ( you ) don't feel that you get less perks than golds.
You might even have preferred the lounge breakfast if you like the lounge but what you naturally enough don't like is not having the choice.
The two places where I have been upgraded to EL access ( Stockholm and Prague Old Town ) both gave me the choice between lounge breakfast and restaurant breakfast - and I mainly ate in the lounge, but I certainly liked having chosen it myself.
Enjoy your time in Dubrovnik.