“Diffident” means lacking in trust or faith; full of doubt. In the context, my first guess would be that Thatcher did not trust assurances, promises or statements of intent offered by or on behalf of the Argentinian government, and this was making a negotiated settlement more difficult, and recourse to force more likely.
BTW, @cannonkuo, when you use an exact quote from someone from a cite, as you appear to have done with a quote by Reagan in your original post, it’s a good idea to put the other person’s quotation in quotation marks. Doing so makes it clear to anyone who reads your post that the phrase is an exact quote, not just your own words.
Yes, that fits. So in the rather oblique way the quote puts it, Reagan was saying the signs were that the British weren’t in a mood for compromise, or at least not for whatever Haig might have proposed. Which was pretty much the case.