@amirseni: Even though I'd agree on your conclusion, it shouldn't take much longer than a few seconds to flash the diags partition anyway (around ~3s + ~6s, apparently).
Keep in mind that the passwordless thing is only over SSH, not serial

.
That's the bounds of my theoretical knowledge though. I'll just add that fastboot lying and not doing what it was supposed to sounds vaguely familiar, so someone might have an inkling of what's happening.
Also, and this might sound like a stupid question, but I assume you've unmounted the image after running the rp script?