It looks to me that the flash was camera left and above.
I like the portrait overall, but if we have to get down to nitty-gritty, I have a few niggles with it, some of which may just be matters of taste. First, I’d like to see a slightly more even lighting ratio. Bring that background up a stop or two (read: longer shutter). Second, I’d like to see more contour on the face—this could probably be done in photoshop with some subtle use of the burn tool (key word is subtle), but that's still no match for getting it right in-camera. Lastly, if you say you used a diffuser, I’m assuming it was just one of those flip out ones that is built into the flash because that’s still a pretty harsh shadow on the child’s neck under her chin.
Even shooting through a 5-in-1 reflector would probably be sufficient to not only tame that shadow, but bring in some nice facial contour as well.