The earlier the better. Easiest way to do this is to use Blind on him, and attack with limit breaks. Don't worry if your HP goes too low, under Blind Diablos won't hit you phisically, and his attacks (Demi and Gravija) Cannot Kill party members (when your HP goes to 1, these attacks will always hit with 0). After Blinding the bastard you cannot possibly be defeated by him.
Quickest way to get his HP down is to draw and cast Demi on him, at least for the first few turns, at which point it's probably easiest to use Squall's Reznokuken (as long as you've ensured Squall has levelled well and has good Str), and use the other characters to keep everyone alive or summon other GFs.