I think you're right that Diane's awkwardness was genuine, and I think Alicia understood that, and as I think about it more, it does seem like one of those situations where the apology itself only increased the awkwardness of the situation.
There are a few aspects of Alicia's life that could be filed under "Your feelings about or relationship with X, which we never acknowledge and I would never want to, except I now have to, and it's awkward."