Honestly, this just happened in 1.20.2. I'm not sure if it's actually fixed
Yup, this is indeed a vanilla bug. I tested it in vanilla 1.20.1, and diamonds still had the same generation bug.
I'll test this in normal minecraft, but it's likely in the normal game as well.
If the screenshot is considering server advertising, it's not intentional
I believe you are right, so I guess you solved it
Okay, I'll add a video of this in Vanilla.