If your schematic is correct, that diode in question is most probably a zener.
Did you inject that signal before the diode as well? If not do so.
If its not working that way, check the diode out, it might be bad.
If it's not bad, check if the trace before the diode is shorted to ground.
Yep I've tried injecting before the diode, it didn't work unfortunately. It wasn't shorted to ground but I'll double check when I can.
I thought it might be a zener as well, but the diode loooooks like a normal one and is a common component on the board, it's identical with things that should just be a normal diode. It measures okay but I may swap it with another on the PCB. I'll do it as a last resort because it's awfully close to the connector and if I damage it, it will be damn near impossible to find a replacement.
Quite a few components are under the VFD display so it's tricky to probe around too. I need to buy some nice probe grabber hooks.

What VSS does the car have? 2-pin or 3-pin? Does it have ABS? Turbo? Automatic?
3-pin VSS output is open-collector with a voltage-divider (2 resistors) to lower from 12V to around 0-5V swing, see MK4 pic.
I'm 99% sure it's a 3 pin. The car is originally a N/A Auto, no ABS. (car is now turbo conversion with a piggy back ECU controlling timing/ignition/transmission, original engine ECU still in place, but transmission ECU removed)
The VSS looks to be functioning fine, I measure 0>12V while driving, and the speedo works no problem.
I know a common "mod" to fix a speed sensor code due to a dodgy odo buffer circuit is to just cut the pink wire to the ECU and splice it to the VSS. The odometer still counts after the "mod" so we might be able to conclude that the ECU side has nothing to do with it counting.
The more I think about it, I'm pretty sure the odometer should be "generating" ~12V on its own (either by pullup or a 13V zener on board), and the speed sensor is grounding it in normal operation (unless of course I'm totally wrong, I put this in the beginners section for a reason!

). I guess lots of inputs/signals work this way to help protect against voltage spikes and stuff? The input diode was confusing the hell out of me, and I was wondering why the "fix" could be to just reverse it.
Thanks guys for chiming in, I'll have the car available this weekend and now I think I have some direction. For sure I'll trace out more of the schematic for future repairers, these cars have somehow shot up in value in the past few years and spare parts are getting impossible to find. A spare (possibly broken as well) odo module shows up every few months for ~$150 in Japan, I will have to grab one next time.