Peel was overlooked for Wales' World Cup squad but was the outstanding performer at Edgeley Park on Friday night as the Sharks bounced back from their opening-day defeat at Worcester to ignite their campaign with a hard-fought win.
The Sharks edged an absorbing encounter which saw them claim two first-half tries from Henry Thomas and James Gaskell before Peel went over for a decisive second-half score.
The Exiles, who touched down in the first half through David Paice and Jonathan Joseph, at least went home with a losing bonus point thanks to the expert kicking of full-back Tom Homer, who kicked seven goals from as many attempts.
Yet Peel took all the plaudits and Diamond said: "Peel was outstanding and led by example.
"Wales must have good scrum-halves or poor selectors - probably a combination of the two - but Peely has got over being left out and we're happy to have him here."
Diamond presided over a major overhaul during the summer and is still missing a host of players due to World Cup duty.
He added: "It's always good to win at home and we've achieved that but we're not the finished article just yet.
"We're not Real Madrid at this moment in time, we're more Accrington Stanley."
Irish head coach Toby Booth could not fault the desire of his young side but showed his frustration at a second successive defeat.
The Exiles lost their season opener to Harlequins last weekend and Booth said: "It's frustrating but unfortunately the scoreboard doesn't lie and we've come second after a very battling performance, which you have to do at Sale.
"Everyone knows how young we are as a team and we have to make sure we learn our lessons quickly."
Booth also admitted that Peel proved the difference between the sides, and joined Diamond in questioning Wales' decision to omit him from their World Cup squad in New Zealand.
Booth added: "Dwayne Peel was excellent and there's no substitute for experience.
"He's a world-class player who I believe should be sitting many miles away.
"But it's frustrating for us because we battled and competed well, yet you have to maintain your concentration for long periods of time.
"It was two inexperienced sides and that's why there was such an ebb and flow to the game."
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