hello
yes, the diode is there to stop the signal from the controller board to the 2nd controller. if a single controller is connected to the original controller board, the console does not understand if 2x 1st players are connected simultaneously and have the strange behavior you just mentioned. the multitap certainly has built-in diodes.
my version of the board is the same as turbokon, i just followed the trace design of the original board to make it look cool, and the signal has larger traces to make it stronger. It's "just" a game controller PCB, I followed the schematics of a real PCEngine controller and added 4 diodes on each signal because turbokon did that too
I tried with and without a controller and with a multitap, it works perfectly.