He's in the same boat as me: He has the integrated HD thru the i7, as well as the dedicated (ATI in his case, nVidia in mine) graphics card, and his laptop is ever so smartly choosing to render with the Intelgrated, probably to save power.
In my case, the fix is: right-click Desktop, nVidia Control Panel (or search from Start Menu).
Under 3D Settings, click Manage 3D Settings in the left side panel.
Click "Program Settings" tab on the right.
Click "Add" button, browse to Diaspora .exe
Under "Select the preferred graphics processor for this program:", change it from "Use global setting (Auto-select: Integrated)" to "High-performance nVidia processor".
Click Apply
Now re-detect your graphics card in Diaspora.
Somehow, you need to find the ATI way to do that, which I expect will be found in your Catalyst Control Center. 
Hope that helped.
EDIT: Maybe put something about this in the FAQ for those who have dual Intelgrated and ATI/nVidia?
Apologies, I had used the catalyst control center (CCC) to alter the preference of card for the main .exe but not for the debugger, which is a different .exe file.
When running, it appears to be "Not Responding" it's so slow, but then loads. I have changed it so that the Radeon now applies to the debugger, and this has not improved performance at all. Still 4-5 FPS.
Your last note, asking to "re-detect the graphics card in Diaspora" I have not been able to find. It doesn't seem to be under Options in the game, nor in video basic settings in the launcher. Any help is appreciated!
You guys rock for parsing this crud and figuring it out!
Hmm, I checked and I don't see that option either, my bad, I think I mixed up the wxLauncher with the FS2 retail launcher, since I was playing around with that earlier to test out a 3dfx Glide wrapper for Windows 7... So it looks as though detection is automatic.
However, log is still showing Intel. You have latest ATI drivers?
Possible solution for people with switchable graphics:
http://h10025.www1.hp.com/ewfrf/wc/document?docname=c02948560&lc=en&cc=us&dlc=en
I have no idea if this will work or not, but it would explain why the discrete graphics card isn't being used for diaspora, despite the CCC telling it to do so.
UPDATE:
FIXED!
Woohoo! Running Diaspora beautifully in 1920x1080!
Update your ATI to the new CCC, then update BIOS, then hit f10 during setup, change switchable graphics from dynamic to fixed, and voila!
It's complicated, thus the link, but it works awesomely, and I would never have figured it out if you hadn't pointed out that it was the integrated card still active, even after switching it. It has to do with OpenGL not working with discrete graphics in switchable systems. I know nothing about computers, but I made it work and I'm very excited.
Thanks guys!
EDIT:
Can we compile a tut for changing your default graphics card for users that have both Intelgrated and AMD or nVidia cards (laptop users with i5/i7)?
Cause:
Should have noticed in the last log that you're on Intel Graphics. That's below the recommended specs for the game. That said, some people have had success by turning off Post Processing from the Advanced Settings->Troubleshooting section of the launcher.
After that last comment about Intel Graphics, found that Diaspora (but strangely not other games) been using integrated graphics instead of my nvidia card...gave it the switch for and whoila!! Max out the graphics and back to splashing toasters! no more CTD or interrupted gameplay 
boy do I look the look the idiot...
http://i.imgur.com/uKl5M.jpg
Thanks for the help! 
Razor, how did you change your graphics card? I seem to have the same Intel issue.
Probably depending on your graphics card, but I changed mine in my Nvidia control panel (find in control panel, performance) , under managing 3d settings, then under preferred graphics processor selecting my graphics card.
I'll post a screen shot later if anyone's interested, worst feel to find a game has been running on Intel graphics and not your expensive graphics card.
Fixed! Someone should make a note that this seems to be a problem with laptops!
