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I know they have been used - years ago, I used to work for a rancher who had several radial diesel engines that he'd converted to drive irrigation pumps. (The guy was something of a mad inventor type. I particularly remember his homebuilt forklift, which worked quite well except for the fact that it steered backwards - turn the wheel right, it went left.)
As for why there aren't many diesels, or much emission regulation, in prop planes, consider the size of the market and the cost of getting ANYTHING certified under the FARs. Most general aviation planes were built in the 1960s, if not earlier, using engine designs from the '40s and '50s.
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