Make sure your doing light cuts, that your BB's arn't fouled up with metal shavings and that the comm is lubed while cutting. Also make sure that you have the arm shimmed correctely.
If not the above then go through these steps and make sure you've set your lathe up correctely.
Ok put the bit in so that the cutting face is down. Make sure that it is pushed all the way in so that it makes a 90 angle. Then screw it in (lightly) so it dosn't move. Next you need to make sure that when it cuts the bit isn't too low(if it is'nt shimmed to the right hight it won't give a nice cut). So you should have been given some thin metal sheets or you can just use paper to put under the bit too so it is at the right hight(only use as many as necessary). You'll need a hinge pin or a perfectly true thin cylindrical piece of metal to put in the v/blocks or bearing guides to simulate an arm. Then measure it if possible (or eyeball it) to make sure the bit cuts perfectely at the center of the pin or just a touch higher(make sure it isn't lower then the center). You want to be able to adjust depth with the lathe adjustments so make sure the bit dosn't stick out of the block any more then necessary. Tighten well with threadlock if desired and you should be ready to go.
Ok next, daimond bits have a habit of chipping easily, so if it's giving you a crap finish and you've set up and are operating the lathe correctely the chances are that's your problem. Get a magnifying class and check the bit for slight chips, these may be where your problem lies. I'd say just spend a few bucks on a carbide bit and sharpen it when necessary, it's much cheaper and works just as well.