Pluto orbits the sun and was at the time of discovery was the smallest planetoid discovered. Their wasn't all that much criteria to be considered a planet at the time because their wasn't much knowledge of anything inside of our own solar system let alone the rest of the universe.

Coal has little to nothing to do with the formation of diamonds. Diamonds are for the most part believed to have been formed before any form of plant life existed on earth. Coal and other fossil fuels are formed from the decomposition of organic matter over the course of very large swathes of time. Also, coal is typically found in horizontal rock formations, and is made of sedimentary rock, whereas diamonds are found in vertical tubes, and are made from igneous rocks.