The reason they didn't use diplomacy was because of the script's weakness. There's no way it would work out. Either the Baku would agree to be relocated for the greater good the resources would provide, and thus there's no story, OR, they refuse to be relocated, putting their Luddite village above the greater interests of the Federation, the Son'a, etc., and thus they lose audience sympathy as they're portrayed as rigid, inflexible, and ludicrously self-centered.
As SFdebris put it, at least a dying soldier who fought the Dominion can die peacefully knowing that even though the Federation didn't get the means to harness this medical miracle, they did it because they didn't want to cause any "inconvenience" to a race of 600 self-centered jerks.
"We believe that when you create a machine to do the work of a man you take something away from the man."
And giving yourself immortality doesn't take something away from the man either?
you know what amazes me about the discussions here? That there are folks who have actually given the matter some serious thought and STILL side with not removing the Baku. I mean, I can understand if someone was just watching a film they found entertaining, and didn't really think too deeply about it. But to actually analyze the situation as it is in this film, NOT using historical analogies or metaphors, and still say it's wrong to remove the Baku is just baffling to me.