if i were going to make up some support for multi-colored sky i would start with the atmospheric particles. Ours are of a size that 400ish nanometer light gets scattered (often referred to as the raleigh effect) but you might posit different particles that scatter different wavelengths..
another way to get there would be to change the vision of those looking up. for instance, its theorized that there exist in the world tetrachromats, or people (with two x chromosomes specifically) who have a fourth type of cone cell in their retinas. theres a great radiolab episode about colors in which one lady who might be a tetrachromat describing all the pinks (and yellows?) she sees in a regular old blue sky.
as for diamonds in the sky, you might theorize some race that is able to extract the core from a still burning red giant where godawful amounts of pressure heat and carbon might very well be forming a giant (larger than planet size) diamond. alien tech is just as useful as magic