When I select a diamond block with the cursor the diamond is a thin veneer/layer seperate from the block underneath and it cannot be mined. The diamond falls off when mined with an iron pickaxe.
I have uninstalled and reinstalled the game from the microsoft store.
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This "thin layer" on this copper ore block is glow lichen - light emitting plant that can generate on side of a solid block.
This seems to work correctly - those are just new 1.17 features.
Duplicated this, but it's working as intended.
If there's lichen on a block you have to remove it if you're mining that surface before you can mine the block (In practice you can just keep going - that's why you saw the raw copper fall. No lichen falls because it is destroyed when using a pick).
If you illuminate the block well using torches you will see the hitbox switch to the block the instant the lichen is off.
This is identical to what is seen when chopping up a tree trunk with moss on, so it's not a bug.
PS: After going through your report again it seems like you misidentified the lichen as "a thin veneer of diamond". Diamond ore does not emit light, glow lichen does, at a very low intensity.
That is copper ore, not a diamond block.
Is the problem limited to that particular block or all blocks that you try to mine?
I'm playing the same version on Android and have never seen this before - I'll try to duplicate it anyway.