My friend plays Diddy Kong so I'm familiar with the match up. Diddy's fair is really good, before knowing the match up it just seemed like it came out of nowhere, and even after knowing the matchup the fair comes out so quickly you're likely to get hit once unexpectedly and if you block it grounded Diddy will just grab you the moment they land. Rolling seems to be easily punished by Diddy, especially with his deceptive fsmash. I only recently noticed how good Diddy's dtilt is when I was punished trying to roll behind him, it's also great for ledge guarding.
I have a lot of trouble winning but it's certainly not impossible to win, you have to play it really slow and carefully though because one mistake is guaranteed to get you punished by Diddy Kong. Approaching with sh fair is a good option, mix up with retreating fair and bairs because if they get the chance they'll grab you the moment you hit the ground and equalize any damage you've done with a dthrow combo, making yourself hard to read and predict is pretty much essential for all MU's of course. Palutena is really good with dealing with Diddy's side special with autoreticle from a decent distance and if you use reflect he'll bounce over you and give you a free punish if he's kicking. It's better to avoid approaching Diddy if you can, use bair and dash attack to deal with his approaching fairs, Palutena's fair won't work unless you perfectly space it so bair is simply a better option. Diddy kong is also a character that's also really easy to gimp, bthowing off the stage and going for a dair is risky but they'll have a lot of trouble recovery from it and with Diddy's recovery being kinda broken in all the wrong ways (hitting the ledge sometimes just sends him flying away from the stage at the wrong angle) it's your best bet for an easy stock, Diddy will win uair against dair most of the time but it's very easy to bait out and although uair has really fast recovery the best chance to hit your dair is right after they use it (if you bait it out). Don't take the game off stage if you can though, if you need to warp back to stage Diddy can stage spike you, I'm not sure if you can tech the hit but it's worth trying. My friend baits me off the stage sometimes to get these stage spikes, it's my fault for falling for them but still be careful there.
That's about all I can say on the matchup without going through a match, unfortunately I always forget to save replays after games so I don't have anything to go off besides my experiences. Only other thing is don't sh dair, it's tech-able and you'll get punished if they tech it, it's happened to me numerous times, not 100% but it happens often enough that I don't encourage it at all.