Reliability of Rotaxes is poor by reputation, however that is heavily biased by the early 2-strokes, which whilst cheap, light and cheerful don't have a fantastic ratio of hours per failure. The first Rotax 4-stroke, the 508, made the 2-strokes look good.
The new models however, the 912/914 series seem from what I've seen to be giving equivalent reliability to the Lycontinentals, at rather better cost and weight. TBO is shorter, but cost/hr still wins hands-down. That said, I've not seen any verified stats, and you'll still see a certain failure rate on homebuilts/microlights/owner-maintained aircraft where the operating environment is more hostile to the engine than that of a certified aircraft/engine combination.
So far as Diesels in little aeroplanes are concerned, it's interesting to attend one of Mark Wilsch's talks on the subject which he does at the occasional conference. He's clearly one of the biggest advocates of Diesels, but explains very clearly why he believes that below 140hp-ish there's no future for Diesels, and that there's no way his technology can compete with the abilities of the 912/914 series. Since it would clearly be in his interest to prove otherwise, I assume he's being honest!
Having flown both a lot (that is Rotax and Lycontinental), I'd certainly rather be behind a Rotax, which when well set-up is smoother, quieter, less thirsty, and generally needs "nursing" less once you've got the CHT up for take-off power.
G