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Putting a diffuser on your on-camera flash does not change the angle of reflection off the retina, which is the cause of red-eye. Red eye is caused by having the flash close to on-axis with the lens, which means the light reflects off the retina and straight back into the lens. It's sort of like what happens when you point your flashlight at a reflective street sign and the sign seems to reflect blinding amounts of light back at you. If your friend fifty feet away shines a light on the street sign, it doesn't produce the same highly reflective effect from your perspective.
In addition, the wider open the subjects pupils are, and the more powerful the flash is (especially compared to ambient), the more you see red-eye.
The diffuser helps a tiny bit by distributing more light out to other surrounding surfaces from which it bounces back down to the subject. This has a similar effect to increasing ambient light very slightly. But the primary light source on the subject is still usually the strobe, diffused or not,
If you want to eliminate red eye, get the primary light source away from the lens axis. This means bouncing or using off-camera flash, or at least using a flash bracket (cue '70s music).