Hi Howard
You are correct in the fact that the diode will not protect against the stuck fuel relay, however, this relay almost always fails to close, not open, and seldom is the cause of fuel solenoid failure. Fuel solenoid failure almost always starts with the starter contacts. This diode does protect against backfeed from stuck starter solenoid contacts.
When a starter sticks on it is caused by the worn contacts arcing and becoming welded together. When this happens the solenoid coil back-feeds 12v up through the trigger curcuit to the 70amp fuel solenoid relay. This is the part you're missing. The relay then thinks it getting the power from the ignition switch so closes the relay and energizes the fuel solenoid via the "pull" coil. This is why the engine won't shut off by the key. This "pull" coil is very strong but low resistance so will overheat very quickly if allowed to stay energized. This is what causes the fuel solenoids to burn up.
So, by installing a one-way diode and preventing the starter from backfeeding the fuel solenoid curcuit we save the fuel solenoid from burning up if the starter sticks on, again, the primary cause of fuel solenoid failure.
I agree it doesn't protect the entire system like your method does, but it's a very simple fix that will protect the fuel solenoid from the primary cause of failure.
Larry