OK, first of all, did you remove the AVR chip from the Diecimilla before you tried to program the LilyPad? Two chips attached via the same communication bus will really confuse the computer. Try that first!
Second, I have to confess that I've never tried programming the LilyPad via the Diecimilla board because I thought that the auto reset functionality on that board might interfere with the LilyPad communication. This is why I recommend using an NG. But, your post makes me realize that I should have concrete results to report back on with Diecimilla. I'll do tests as soon as I get a chance.
Third and sad possibility is that you may have fried your LilyPad when you fried your mini USB adapter. You probably had a pretty bad power-ground short going for awhile (via the coductive foam) and this makes all electronics unhappy. If you'd like to send me your LilyPad you're welcome to. Email me & I can give you my address...
I'm sorry that you'd had a bad experience! I trust in your competence programming wise & I know how you've feel. I have been in your boat many times. From this discussion, I suspect that it was the conductive foam that killed things for you... Don't give up on the LilyPad yet!
& send a comment to SparkFun about your connection travails, requesting a nicer interface 
This will help me persuade them to invest in a redesign.