I think the Cdim7 moving to Dm7 sounds good because it's resolving as it should and in a way our ears are expecting.

Dim7th chords are classified as chromatic harmony and usually if you chromatically alter a note, it resolves in the same direction as it was altered. If you sharpen a note it will resolve upwards and if you flatten a note it will resolve downwards.

So for example, if you changed C Major chord to C augmented, the G# should resolve up a semitone to A. When we play Caug Chord then F Major chord, the release of tension from the G# to the A sounds right and pleasant.

In Cdim7 the Eb and Gb are, as already mentioned, appoggiaturas to D and F, so by lowering the the Eb and Gb a semitone to D and F, the result is smooth and they are resolving in a theoretically (what a horrible word to spell!) correct way.

The resulting Dm7 (C,D,F,A) releases the tension in a way that is expected and "comforting" to our ears.

Nice!

yjoh

[i]Music...a joy for life.