Diagonal has a couple of benefits.
It helps with wood grain, or other materials with a constant grain.
The speed can be higher as you're using both axis together, basically traveling along the hypotenuse when moving in X and Y.
Horizontal engraving is generally the better choice for quality unless you need the above, as moving in the X axis only is smoother and backlash is only in a single direction.
Try v1.3b with my default settings, that should improve the edges (use horizontal mode).
