That's odd about not finding more diamond. I guess it's a bit random. That cave system I mentioned is really
huge and I found altogether 26 diamond in it. I did expend about 350 arrows exploring that cave system though.
I think you can mine obsidian with an iron pickax. It supposedly just takes even more time, I've heard around a minute per block. But I easily get bored mining obsidian even with diamond pickaxes, so that was never an option for me.