I've been diffusing my hair on an almost daily basis for the last year and 1/2 and I haven't noticed any significant damage. In fact, my hair is a lot healthier since I started coming to this site and began taking better care of my hair. I don't diffuse all that long - it still has to air dry for awhile when I'm done diffusing. While air drying would definitely be healthier for your hair, I think if you're not using super high heat and being gentle with your hair, you should be fine.
My hair is in good shape and I diffuse daily as well and I actually use the high setting when I first start and then down to medium. I have read and heard that you will get your hair dryer faster so less damage (who knows??) - drying on cool drys the outside first according to what I have read.
In any event - my hair is pretty healthy and I do this daily.
One good reason to only maintain a small circle of friends is that three out of four murders are committed by people who know the victim. ~George Carlin~
In regards to Vagazzling: They just want to get into the goods without worrying about getting scratched up by fake crystals. ~spring1onu~