First, if you have a Diamond you should update your profile so that we know.
The CDMA version of the Diamond (Sprint and Telus) do not have the FM receiver. Or if they do, we were not provided the software or the headphones, which are the actual antenna. So it would be hard to determine the real answer to your question, other than a logical question. Does your FM radio in your house or car transmit FM signals, or receive them? I am betting that it they just receive, which I would bet is the same for the Diamond.
As for music players, I have used MortPlayer for quite a few months now (on a Mogul, Touch and now my Diamond) and very much prefer it to all of the others out there. It is free, skinnable, has an alarm clock and other cool features. And it looks great on the VGA display. Check it out
here.
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