Thanks for your comments, and it's very confusing as every article I read said that it was PC who pushed for her HRH to be removed. I didn't know this, that HM had wanted her to keep it as the mother of the future King. That seems logical, so why did PC insist that she lose it? That's what I'd like to know. The reason given in the article that Diana tried to back the RF into a corner and then jumped the gun seems odd.
From your explanation, Lady C says that HM and PC had privately agreed that she'd keep her HRH but Diana jumped the gun so they gave her the lesser title. Is this true? This wouldn't have happened if they'd been clear in the first place and followed protocol, and if there had been no arguing about whether she should keep it or not? The Burke's Peerage writer said there was protracted wrangling as to whether she should keep her HRH, and that to lose it would be "unprecedented". The protracted discussions must have been between HM and PC, but it doesn't explain why PC took this position.
I don't really understand it all but it's a mess isn't it. The bit in big type, that she was "punished for not settling for HRH Princess Diana" is confusing. I'd like to know why her title was removed and what it achieved.