According to my reading of HHonors T&Cs plus my experiences, the “Diamond Guarantee” only applies to reservations paid for with money, not for award rooms.
For Award Rooms, the Diamond Desk is almost always able to do a “Diamond Override” to get a room using an award when the hotel is showing no award availability (as long as a standard room is available for a reservation paid for with money). But that override is NOT a guarantee in the T&Cs. It is just something that is done more often than not.