Mobipocket is the best one I've come across, you can convert from pretty much any format under the sun (including PDF) using the Creator application that can be downloaded as a companion to the Reader app; both are completely free. The cool thing is that you just install the desktop version of the Reader app then connect your phone to the PC and it'll automatically install the app on your phone for you.
The only annoying thing is that the cross pad on the Diamond is nearly impossible to use without accidentally clicking the 'hang up' button so turning pages is difficult without accidentally minimising the app, but that's an issue that would happen with any book reader app so I can't really lay the blame for that at the door of Mobipocket. Anyway, you can set up Mobipocket such that tapping the right and left hand sides of the screen moves you back and forward through the book instead which isn't too bad a workaround.
It would be nice to remap, for instance, the hardware volume buttons to back/forward but the Diamond seems determined not to allow anything like that, no matter what application you're running the sodding hardware buttons always just override the application and perform their original function (e.g. changing the system volume). I'm pretty appalled in general at how badly designed the buttons at the bottom of the Diamond are (yes, I'm sure they look very nice and it's a victory for the internal HTC design team, but actual usability of the sodding thing should never be secondary to the look of a device) but that's a different subject entirely.
