I don't have any insider knowledge but the diamond looks like pretty much the only satisfactory option if the design criteria were for a Unicode symbol (for ease of implementation and insertion into text usernames), that was widely supported across browsers in 2008, is bold and stands out clearly against text, and doesn't have confusing technical or other meanings:
- Stack Overflow was launched in 2008 when things like icon fonts and font-face weren't common, and browser support was a more difficult problem than it is now. Firefox didn't support font face until 2010, for example. So, the choices would be limited to widely supported Unicode characters, else browsers would turn them into
?s or empty squares.
- If you look at a list of widely supported Unicode characters from the days of HTML4 (alternate links are available in the comments if this link doesn't work, that properly old-school page has different geographic mirrors... haven't seen those since the '90s), there are really very few (♠, ♣, ♥, and ♦, possibly •), that meet the following criteria:
- Bold and stands out clearly next to a username.
- Doesn't have a technical or other meaning that would cause confusion. ¶ is a paragraph symbol, † would look like a footnote or religious symbol, and ⊕, ⊗, ⋠ and ∇ all have technical meanings in mathematics.
- Of these, ♦ is the simplest and has least potentially confusing connotations. ♥ wouldn't really fit the tone, ♠ has associations with death and (usually bad) luck, and ♣ is a more visually complex symbol and looks like it might have a deeper meaning, e.g. it could be mistaken for an Irish shamrock. • is a bit weeny.
♦ however, is just a simple, reliable, eye-catching mark.
As for why not a text string like [M], diamonds are forbidden in usernames to prevent fake moderators, so presumably it was felt that reserving one rarely-used Unicode symbol from usernames was more elegant and less obtrusive than banning an arbitrary string of common characters like [M]. The diamond is also much more visually distinct than [M].