Correct, when the DAC is outputting a signal, it is a line out. If the DAC is muted (electronically, internal, not on source volume control) it effectively disconnects the DAC from the output (the mute switch is opened) and the line outputs become open circuit.
This in effect makes the line out an input to the headphone amplifier.
As said, it is one of those things that "works in practice" but is not a formal intended feature.
I had no hand in the signature. It is mostly a BL as far as I can tell with just the connectors changed. But I do not know for sure the precise details of the changes.
Looking at the PCB photos they appear minimal to the actual electronics, so it seems the 3.5mm jack was simply deleted. There were problems getting good quality jacks and there were a lot of machines in the field where the switches in the 3.5mm jacks lost contact.
We later switched to another jack for later products that does not have these problems, but marketing never liked the line in feature. One reviewer apparently compared the Amp alone against a very esoteric and expensive (~ 6 times the price of the BL for a HP amp only) stand alone HP Amp and concluded that "the ifi BL is let down by an average Headphone Amp", so I think when the chance came to ditch a feature that caused that they must been jumping for joy.
I do not think that there was any change to the "Signature" that makes it sonically better than the BL. Just keep your BL.
The story starts with the standard (silver) iDSD micro. It was designed for 299-399 USD price point and to be what I'd (trans)portable, not "pocketable". It was designed with good quality, but not audiophile grade components. It's design and features were ostensibly "crowd" sources, though this was moderated and managed, so it was more a way of getting feedback on features and if they should be put into the final product. It sold well and helped to establish ifi's reputation for affordable products that "punched above their weight".
Eventually the original iDSD micro became "stale" in the market, but there was no real major redesign that made sense. So in effect the "Black Label" became what would have been otherwise a "signature" or "tuned" edition, with improved active and passive parts. It affected a lot of parts all across the circuit. It meant existing PCB designs and production jigs and process could be retained, making it an quick and easy way to improve the existing product.
The only real difference between a silver or black edition are the parts, not the actual circuit which is identical. Call it a "factory tuned" edition. The sonic difference is that the "Black Label" is a little cleaner, more transparent, more spacious, nothing night and day, but notable, for a nominal price increase.
The result was renewed and arguably improved sales, in a market that started to catch up with the product.
AFAIK based on looking at the PCB photos there are no obvious circuit and parts differences between BL and SIG, I do not expect sonic differences, so it is probably best seen as a purely cosmetic facelift with small changes to features and updated connectors.
The "Diablo" is a more interesting story. It originated when someone at the time sales manager for China asserted it was impossible to sell the iDSD micro in China, because it "sounded old fashioned and not high resolution" and because it "had features that make the sound bad (e.g. crossfeed, bass boost, selectable digital filter).
That led to the idea to make an "alternate take" on the BL that used a modified headphone amp with a more "bright" tuning, did away with all the in my view useful sonic features (which seems to be viewed by some potential customers not as ways to fix problems with their headphones - which is what they are - but as band aids to make a poor product sound better). As chinese like "Red" it was called the "red label" internally and the original prototype was spray painted "China Flag Red" with the intention to get "Ferrari red" for production. My suggestion to add one big and four small yellow stars was not acted upon

.
Anyway, It was to be a stripped down version primarily for the Chinese/Asian market and secondarily an alternative for western consumers that would look for a "featureless" product (kinda like an AR-15 for Kalifornifikation).
Prototypes were hacked up as conversion from actual BL PCB's and it was supposed to have pre-production units at Munich (21017 IIRC) before the project was killed, presumably because importers and dealers were unenthusiastic to carry two mostly identical "new" products that directedly competed against each other and might simply confuse customers and might cause them to buy something different. I don't really know for sure. I felt that this "red label" went directly against the basic principles behind ifi products, so I was not that unhappy to see it's demise.
Despite me pushing for replacement designs for the BL based on the x-series design language and principles this was not green lighted, supposedly the BL sales were strong.
My intention was to scale many of the design approaches into the BL replacement, which would have used the volume control and other related electronically controlled systems from the xDSD or xCAN with the headphone amp designed for the aborted "red label", added bluetooth and DSD/MQA decoding from SPDIF (taken from the Pro iDSD). It would have been balanced.
A merger of xDSD & xCAN was also discussed but at the time not acted upon. This seems to have been revived as the "gryphon" in a way that suggest a literal copy/paste combination of the two products into one PCB, instead of actually upgrading the xDSD Headphone Amp the way I had originally intended.
The xDSD was actually designed as replacement for the iDSD nano, but ended up being priced way above that competing with the iDSD micro which is clearly the all round better product and as a result likely sold well than it deserved and would have done at the original design price point of 250 USD.
It is things like that caused rifts. Products were overpriced and thus were poorly competitive in the market, because they were competing with products they were not designed to compete against and sold poorly and the blame was not put at the pricing or marketing.
With a big hole left at the bottom of the range due to the "nano's departing and the xDSD/xCAN being too expensive you got the "HIP DAC" and the first generation Zen's and other products were prioritised. These were actually again products in classic "ifi" tradition, the Zen DAC & HIP DAC for example are 95% the iDAC 2 micro with very few changes to make them balanced. The Zen CAN was a new ground up design.
Then there were various "small size products" currently coming, BT & USB dongles etc. You can tell if a new gen product in that range originated with me by looking at the DAC Chip, if it is BB or CS, it was stuff I worked on, if it is ESS (except the 90123 in xCAN, Zen Blue and Aurora), I had no hand in it.
Meanwhile the Black Label iDSD micro was soundly overtaken in the market and again became stale with slowing sales.
When it became clear that I would irrevocably leave iFi after serving out my notice period over a wide range of differences (let's call them creative, business and financially related) there was a sudden push to get the "red label" into preproduction and to make it balanced, without actually making it the kind of product it should have been. It ended up a bit of a rush job and missed out on many opportunities it would have had as a full redesign.
I suspect someone else worked behind my back on the "signature", not that there was a lot to do. As said, first I knew about it was when it was released.
Release was already over a year after I had left, seems things took time. While I am sure they are still viable products delivering good sound, I do not feel they should have been released in 2020, when it was possible to come up with much better products. Again, this approach to business was apart of the reason for me to leave.
Anyway, I think both "red label" and "signature" releases were "quick fixes" for flagging sales of the "Black Label" without a full redesign that would have forced iFi/AMR to come to a sensible agreement with me that would have kept me on board at least enough to be able to work on serious next generation products. Years later these products that are now conceptually and in terms of technology a decade old are still being sold as "portable flagships".
The "sig" and "diablo" are both products I do not have units in my posession.
I have xDSD/xCAN, Black Label, Pro's, Zen's, Retro and Aurora I retained and use more or less frequently myself and that I am proud to show off. I do not feel that I am missing out on anything not having the "sig" or "diablo". I look at them and I do not feel "I want one, now. Take my money already!".
To me that means with these products (some others too) we at ifi violated the first principle we had when we started the company, namely to only ever make products that we ourselves would be happy to buy, at the price they were sold and with our own money.
Make of it what you will.
I left, then Covid happened and a lot of other stuff, so I have been far away from anything ifi/AMR for quite a few years. I have no real idea what goes on these days.
I think for a while iFi/AMR tried to replace me with John Curl, but his forte is not the kind products ifi needs and he refused to put his name on designs not his. Last time I talked with John he had been unceremoniously dropped by ifi without notice.
Of course, that's just my view. And my side of the story.
I notice that a lot of folks get incorrect, incomplete or meaningless answers from "iFi" to serious questions, which is a shame, as ifi used to have excellent and responsive support and good responses to questions. So if I notice and have the time and inclination to respond, I put in my 2 Thai Baht...
Thor