I made one more change to the file-name-prefixing of diary entries using a
defcustom to define a "transformation function."  I now have in my .emacs:
(setq diary-file-name-prefix-function (function (lambda (str) (replace-in-string str (substitute-in-file-name "$HOME/.diary\.?") ""))) 
(setq diary-file-name-prefix t)

and with the patch below, this yields no prefix for entries from ~/.diary,
and a "[birthdays] " prefix for entries from my ~/.diary.birthdays file.

The default for diary-file-name-prefix is still nil, since if a person
doesn't know enough to define diary-file-name-prefix-function, s/he
probably doesn't want the prefixes in the first place.

Cheers,
-- 
  Ami Fischman
  usenet@fischman.org