You have hit a breaking change we have introduced from Q3 2012 to Q1 2013.
In your scenario, you must set RouteConnections property of the RadDiagram to True. This will turn on the polyline routing mechanism that was automatic in Q3 2012.
We are trying to reflect every similar change in out changes and backwards compatibility sections in documentation.
Please excuse us for the inconvenience caused.
the Telerik team