The confusion lies in the difference between a diminished chord and a diminished 7 chord. Most of us (I know I'm guilty of this) treat them as the same chord, but they're actually not. A diminished chord hosts minor 3rd intervals between all the chord tones, in other words, 1-minor3-b5-bb7. A diminished 7th chord is actually another way of naming a half dimished chord, which is a minor 7b5 chord. Intervals are 1-minor3-b5-b7. We've all just gotten used to treating them as the same chord.

No big deal, when you're blowin' over the chords they pass by in an instant.