Pip Radish,

I have to start work soon, so I don't have time to read all the messages here now. I just want to mention the term "cadence", which refers to something that might be helpful to you when trying out harmonies. A cadence establishes a key. A typical cadence in C maj. would be Dm7 - G7 - C.
Dm7 = D F A C
G7 = G B D F
C   = C E G

When people refer to a diminished chord, they usually mean the diminished seventh, e.g., C Eb Gb Bbb (Bbb is the same as A on a piano or other instrument using tempered tuning). Please observe what happens when you lower one of these notes by a half-step, e.g.,

C Eb Gb Bbb --> B Eb Gb Bbb

we can call this B D# F# A, which is B7, so C dim.7 is the same as B7 without the tonic and with a flatted ninth. This means we can substitute a Cdim7 for a B7 (or B dominant seventh) chord. Dominant seventh chords resolve to the major or minor chord whose root is a fifth below, i.e., G7 resolves to C (see the cadence above). B7 therefore resolves to Emaj or Emin. (You can use Em6, Em7, E maj. 7, Emaj. 6, etc.) You have now _modulated_ to E (maj. or minor).

This also works for all of the other variants, i.e., lowering Eb to D, Gb to F, Bbb to G#/Ab. This is because the intervals between the notes in a diminished seventh chord are all the same, i.e., a minor third. (Check if you don't believe me.)

I've got a couple of other tricks up my sleeve, if this is of interest to you. It's loads of fun, so I'd like to encourage you to experiment. To reiterate a point made above, your ears are the ultimate judge.

And now I've got to make my first liter of coffee of the day and start work.