Logistics are essential on XL, as are the skills you can definitely level up before enemies overwhelm you. Diplomacy definitely doesn't fall into this category. The chances of constantly finding creatures from your castle that will join you for a small fee are slim.

Money is only half the problem: most often, creatures (if they are from your castle) that join you are not of the highest level, or, more often, they are neutral creatures that are simply scattered across the map... on random maps, the chances of joining are higher than on "human" maps, again, BUT: diplomacy doesn't level up quickly for a hero who doesn't have it initially; it needs to be leveled up, plus... we come back to what was mentioned above... and simply running around and looking for creatures from your castle is a waste of time... although diplomacy has saved me on occasion...