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I came into a situation with a 2-player Small World game, where I was surrounded by an active race with the Diplomatic power, and that player had declared peace with me.
I could not attack the active race and there were no other regions available to conquer. What are my options, except for going into decline?
You always have the option of picking up all your pieces and starting again from the edge of the board. You would probably be able to fairly quickly conquer all regions controlled by your opponent's inactive race.
From the rules, Page 6 - "Abandoning A Region"
If the player chooses to abandon all the Regions he previously occupied, his next conquest must follow the same rules as its First Conquest
By the rules, that's it - on a given turn, you either conquer or go into decline, and if you choose to conquer either you just sit there, or you pull all your tokens off the board and start from another edge. Neither option will really get you unstuck, since even if you start over, you won't be able to conquer many territories your first turn, and your opponent will have plenty of time to box you in before you can expand widely.
As far as I can tell, diplomats are just kind of broken in two-player games. If you get them on the first turn, paired with a race with a decent number of tokens, you can conquer through the center of the board, splitting up what's available to the other player, and likely guarantee victory. If they come up later, it's probably okay, since you're unlikely to be able to cut the board in half without touching your opponent's active race.
(I've had one game like this, and in the future I may just remove diplomat in two-player games, or at least veto it if it comes with one of the races capable of splitting the board like that.)
