Those needles were changed out quite often I thought. Although the Diamond Disc player may be different. Most of them, you'd buy a little metal can of disposable needles and change them out after a few records.
Definitely look up some info and resources on the web, and a free manual download. Watch out for that windup spring if you disassemble the innards - that thing will kill you if it gets loose.
As the name implies, Edison used a diamond stylus for the DD machines. Probably one of the first uses of one for playing phonograph records; most regular phonographs used steel needles which had to be changed out after every play, though needles made of stronger materials like osmium and sapphire were available. The idea of the steel needles was that, at the high tracking weight used for acoustic phonographs (think ounces rather than grams!
), it was better to have the needle wear out than the record it was playing. To that end, at least some acoustic records had some sort of grit embedded in the shellac. I'm pretty sure that the diamond stylus used in the Edison Disc phonographs was meant to be replaced, though I'm not exactly sure how.
The Diamond Disc was meant as a refinement of the existing acoustic phonograph concept. The diamond stylus was part of it; it allowed Edison to use a finer groove pitch, allowing for five or so minutes per side where a normal 10" record contained maybe three. The slightly higher speed (80RPM vs. 78RPM allowed for somewhat higher fidelity, and that may have been the reason for the 'hill-and-dale' grooves (though that might've just been Edison stubbornly sticking to the same cutting method his earlier cylinder records had used).
A standard Diamond Disc phonograph won't be able to play back regular acoustic discs, though third-party reproducers were available to allow them to do so (dunno if they also provided ways to reduce the platter speed to 78RPM). Similarly, a DD record shouldn't be played on a regular acoustic phonograph, as you won't get any sound, and will likely ruin the grooves at the same time. A modern-style turntable with a stereo cartridge, however, will be able to play them back, though you may have to mess with the wiring of the cartridge, and increase the platter speed to 80RPM.
-Adam