Are there examples of diction?

Diction can be defined as the style of speaking/writing that a person uses. It is determined by word choice. Based on that definition, yes, "The Devil and Tom Walker" uses diction, because the author has chosen specific words to tell the story. However, an author's use of diction is what separates good writing from bad writing. Diction serves a purpose. It has to fit with the story, characters, and target audience. When diction isn't properly used, readers can become distracted from the piece or even misinterpret entire messages within the text.
In "The Devil and Tom Walker," Irving uses a combination of formal and informal (or even colloquial) diction. The following is a good example of Irving using formal diction when describing a location.

Any one but he would have felt unwilling to linger in this lonely, melancholy place, for the common people had a bad opinion of it, from the stories handed down from the times of the Indian wars, when it was asserted that the savages held incantations here and made sacrifices to the Evil Spirit.

Notice words like "incantation" and "melancholy." Those words are not necessarily words that audiences wouldn't recognize and understand; however, they also are not words that are typically used in everyday conversation.
Contrast the previous narration with the following dialogue between Tom and the Devil.

"What are you doing on my grounds?" said the black man, with a hoarse, growling voice.
"Your grounds!" said Tom, with a sneer; "no more your grounds than mine; they belong to Deacon Peabody."

Notice that these words are much more common to everyday speech. Additionally, notice how the syllable count of the words falls off. Most of them are single syllable words. It wouldn't make sense to use the high formal language of the previous quote in a discussion between two men in the woods. This is especially true knowing that Tom is a miserly and miserable man to be around. He is gruff and rude, and formal diction simply wouldn't make sense from him.