I agree, in small rooms you have to be careful with diffusion, but it can help for sure.
Some kinds of diffusion (QRD style, ie, devices with different well depths) can create audible artifacts if you are sitting to close to them. A good rule of thumb (this is a useful oversimplification) is that you should be at least 1' away, for every inch of thickness in the deepest well.
Some kinds of diffusion (ie, binary diffusion such as in our Alpha series) don't have this same limitation, so I often lean heavily on them in small rooms.
For reflection points, I do prefer absorption in there -- for me reflection points on the side walls & ceilings are the one place in the room where I always want absorption, as thick as possible, for the most accurate sound. That said, diffusion can also be used but again I usually recommend binary diffusion for this. Main reason is that dedicated diffusors, unless they are several feet thick, are midrange devices. For reflection points you want performance in the bass and treble regions too.
There's an overview of the
different ways to create diffusion on my blog if that's of interest.