Diesel creates about 20% less CO2 per kWh compared to coal.
Gas is better, but diesel is better than coal. The problem with diesel is usually that it's hard to get large enough output for a regional source. But Tasmania is small enough this wasn't too bad.
Diesel was not the backup plan, but rather unplanned last resort. The back up plan was natural gas, which through a series of unfortunate events was not operational at the time. If memory serves me correctly, they had to organise at great expense to get the diesel generators shipped very quickly from overseas since there was no other option.
I believe that no method of power generation is 100% reliable all the time. Power outages happen from time to time, especially when important power links are down.