There have been "diesel" large scale models built, like F units and Geeps, but all the ones I've ever seen are powered by gasoline engines. While there's no technical reason you couldn't use a diesel engine, size and cost would be a big problem. Finding one that would fit in something like a 1 1/4 scale model with enough horsepower would be a challenge. The diesel would also cost somewhere between three and four times the cost of a gasoline engine. There may be one out there somewhere but the engineering and costs don't pencil out very well.