Rather than call it locrian natural 9, why not define it as 6th mode of melodic minor? IMO, it's silly to define a chord/scale as an altered chord when it's part of the melodic or harmonic minor series. I agree that you can't just blindly use it but I use it all the time, even as the ii chord in minor keys where the natural 9 is the major 3rd of the minor key. I don't really think you can generalize though. The chord scales need to have the progression taken into account as well as the melodic line.
Its not a mode, though, its a chord scale. Chord scales often resemble modes, but they are NOT the same. This is confusing, because very often they share the same notes (and names!), but they function in different ways. Modes are used to describe the same set of equivelant pitches with varying tonal centers to give certain musical impressions. The Greeks believed that each mode instilled a specific emotion in the listener, just by changing the tonal center among a group of pitches. When you're defining chord scales, you're looking at a far more vertical relationship, and you're not looking at the same group of pitches, you're looking at an ever fluctuating number of pitches based upon the chord structure of the moment.
What it boils down to is that when you're dealing with functional harmony, you ARE NOT changing tonal centers on every chord, which is why its called chord/scale correspondance, not chord/MODE. To describe it in terms of tonal modes rather than chord scales really isn't the correct analysis. Because, however, chord scales have the same NOTES as modes most of the time, they're called by they're modal name. For instance the II-7 takes the Dorian CHORD SCALE, not Dorian mode. It's confusing, yeah, but there is a very real theoretical distinction to be made. For chord scales like the locrian 9, the fact that its called "locrian" is utterly irrelevant as its status as the 6th mode of the melodic minor scale, its just a naming convention that people have adopted. It could just as easily be called the Aeolian b6 (and sometimes it is).
As to the question of the locrian natural 9 on a minor II-V-I, I do realize that some modern jazz educators and theorists advocate this, but it flies in the face of common melodic practice. I challenge you to find many, if any tunes with functional harmony that have that characteristic natural note in a minor II-V pattern, or any II-V-I pattern for that matter with a II-7b5. The only tune I can think of is Jobim's Angela, but thats the latter practice not the minor II-V one. If its a typical minor key tune, you should only take extreme care with the note, knowing that it is a very unique coloring that isn't very common in melody.
That doesn't make it a diminished chord. If that were true, a any chord could be a diminished chord that chromatically connects two diatnoic chords. For example, in the key of G I quite frequently use a C#m7 4ths voicing (C# F# B E) to connect the IV and V chords or sometimes a B/C# (C# F# B D#)
The difference between the two is that the diminished chord is symetrical (stacked minor 3rds) and can be represented by the semetrical whole/half scale. The half diminished chord is really a min7b5 and it not semetrical.
You're confusing here the concepts of chord FUNCTION and chord CONSTRUCTION. All diminished chords are built the same way and sound the same way (stacked minor thirds), but chords which aren't diminished chords can still have diminished function. Function is an important concept in tonal music, governing the way specific chords behave. Often a chord (like a V chord) is named based on its function (the dominant chord), but other chords can have dominant function in addition to the V (the bII7 with tritone sub, the VII in classical music, etc). You'll find that all diminished chords have similar function and behavior - they occur on a weak harmonic rhythm chromatically connecting two chords sepated by a major second. This is defined as diminished function. Diminished chords also serve a secondary function called auxilary diminished function where they resolve to a major chord on the same root (for example, Cdim, resolving to Cmaj7). These are the functions of a diminished chord in functional harmony, you won't find a diminished chord that doesn't do this.
We can extend that function to other chords that might serve the music in the same manner. The half diminished chord in the circumstance I provided can do that, and believe it or not, that chord that mentioned has diminished function too (although, to be honest, I've never heard of that being done, and sounds a little weird to my ears.) A much more common example of a minor chord being used as a diminished chord is in III-subV/II-II-V progressions where instead of a subV/II, you have a minor chord, so like in the key of G it would be B-7, Bb-7, A-7, D7, which are often the chords played in the turnarounds in How High the Moon. You have to analyze chords not only in their constuction, but their function within the progression as well.