Is that the one where you have to take out the crashed mig? I think I came in high for that one, very steep release like I think you are saying you did. Mostly to stay away from S2A threats but also the problem of accuracy you were having may be to do with the 'torchlight/flashlight effect'. If you strafe or line your CCIP pipper up when in a shallow dive any little error is magnified by your viewpoint's shallow anlge w/ respect to the ground - you are covering a larger area of floor with small deviations from the target.
Imagine a torch (flashlight) shining down at a 45deg angle onto a table - the area covered by the beam is larger than the pattern made when shining it straight down, even though the actual angular limits of the torch are the same.
Additionally you can 'hover' the pipper over the target in a steep dive - rather than trying to time the release for when it passes through the target.
The Diamond thing appears when ever a target is set in the ME - theres a way to stop it showing when you make a mission. I think you set the GOAL of the mission to destroy the object - rather than setting it as a TARGET. The diamond is a little unrealistic, some say its equivalent to a guy shining a laser on your target (real life practice) but thats with respect to the a-10 I think. Many community made missions avoid the diamond for this very reason. It takes the fun out of searching for the target visually or with proper instruments.