What is "Diddly-Squat?"

Well Michael, that is a tremendous question and one that certainly needed asking, for sure. 

Instinct tells me that since the phrase "diddly-squat" is an insult, the origins of the phrase must have certainly been given the most debasing context possible. "diddly" being almost childlike in its cadence, inferring non-importance by the very sound of its pronunciation . Definitely condescending at the very least. Adding "squat" only further cements the insult, seeming to invoke the position required to go poo-poo. 

This said, it would seem to me that knowing "diddly-squat" is tantamount to "knowing shit", which is insulting and very concise by anyone's standard.

My first thought when told I don't know diddly squat is humiliation. And that my knowledge is limited, if not non-existent. And since my knowledge is limited and possibly compromised altogether, my first guess is likely wrong and should be looked into.

Thanks to the devoted staff of the Jerald Ford Memorial Library, Research Laboratory and Ice Cream Stand, we have been able to dredge up the following from the internet.

Etymology:

The Random House Historical Dictionary of American Slang suggests that this is a variation of doodly-squat from 1934, probably from American slang doodle (“excrement”) + squat, used in the sense of defecating.^[1] Doodly-squat was originally the more common form, but diddly-squat overtook it in the early 1980s, and is now an order of magnitude more common in print.

Definition:

slang

: the least amount : anything at alldidn't know diddly-squat about sports— Sam Toperoff
It seems I was closer than my attacker would imagine possible with my guess.So I would have to say, upon further reflection, that he didn't know diddly-squat.
Good day, Sir.