I had to modify the permalink returned by get_blog_permalink($post[“blog_id”], $post[“id”]) to work for my sub directory blog. Here is the change I made to diamond-recent-posts.php.
//Code to create correct permalinks for sub directory multisite blogs
$burl = get_blog_option($post["blog_id"], 'home');
$permalink = str_replace('<em>input here your domain with the incorrect /blog</em>', $burl.'/', get_blog_permalink($post["blog_id"], $post["id"]));
$txt = str_replace('{title}', '<a href="'.$permalink.'">'.$p->post_title.'</a>' , $txt);
$txt = str_replace('{more}', '<a href="'.$permalink.'">'.$wgt_mtext.'</a>' , $txt);