The very structure of the game is unrealistic. The #1 rule in Diplomacy is that no army is more powerful than another. The creators of Diplomacy failed to take into account technology advantages and geographical factors. Also, they base the game off the assumption that two armies of equal size fighting each other will automatically result in a stalemate. For example, could an army of 75,000 well trained, well equipped soldiers defeat an army of 150,000 poorly trained, sparsely equipped soldiers? Yes. Diplomacy fails to take into account the amount of training and equipment soldiers recieve.
How about a historical example:
150 Austrailian (not Austrian) commandos defeated thousands of Viet Cong guerrillas during a battle in Vietnam.
Or, what about 300? We all know about that. That was actually a real battle between Greece and Persia, not just a movie.
Amount of training, technological advantages, geographical factors, and even weather can dramatically affect the outcome of a battle. These are factors that the game Diplomacy ignores.
If Diplomacy included those factors, the game would be much more realistic. However, we all know that it would be impossible to incorporate these into a board game, especially in an online application.
This makes the game militarily unrealistic, but it is an excellent overall strategy game.