I actually don't think this is the tweeter that is called the potato masher. The D175 with its horn is typically the one one referred to as the potato masher. But, to answer your question somewhat, the diffusor is to force more constant directivity throughout the HF's bandwidth. The tweeter otherwise has a narrowing of dispersion (increasing directivity) with increasing frequency. If you want to learn more about this I highly recommend taking a gander at audioheritage.org. There are a lot of altec/jbl fans there with immense knowledge of the history and technology behind this legacy.