Hit configure m&b instead of play when it starts up and look under the mods. If it's not there you can do it the hard way like i did:

I got it to work by downloading the file from the m&b mod website. It's in exe. format so you have to use a program to extract the file (i used the Unarchiver for mac). Go into your M&B files and find the folder 'mods'. There should be a folder called native. Copy that and rename the copy 'diplomacy' (don't delete the original native file!). Copy everything you just unpacked into your new diplomacy folder and let it replace whatever it asks to. When you start the game hit configure m&b instead of play (where you can turn cheats on) and pick diplomacy on the drop down 'mod' menu.

Yeah I got it to work. I was doing what you're talking about but it wasn't showing up so i reinstalled everything and now it works like a charm. cheers anyway :)