So, according to the Knowledge page, Local is used to pretty much find out things about a town whether that be notable figures, folkore, or the like. Isn't Diplomacy to Gather Information pretty much the same thing except that it takes longer?
Not exactly "the same thing" but each of these skills could give you the answers you need, simply different roads to the same destination.
Please note: That in Pathfinder "Gather Information" is part of the Diplomacy skill and not its own skill as in previous D&D versions. The separation here of Diplomacy from Gather Information is more like the traditional use in 3.5 but is fully supported in Pathfinder if you take "Diplomacy" to mean the the normal use of the skill, and "Gather Information" as the specific use of the skill.
This represents the characters actual knowledge of the location, something he knows about the place, this is something that the character would know regardless of coming to the place and talking to people, much like how you may not have been to Paris, but you know they speak French, and have an Eiffel tower. This is more of a passive skill that represents prior knowledge. Generally, this will give you more factual information about a place, person, or other local fact.
This is how good the character is at gathering information about a certain topic, if you put him in a town and have him perform information gathering about the town, it represents the character going to bars and talking to patrons, wandering the streets and talking to people. This is more of an active skill but is still rolled passively, it represents the character actually seeking out information, but it is usually performed "off-screen". Generally, this is more directed at rumors and gossip than actual facts, but it may do both.
This is not traditionally used for knowing things about a place, but diplomacy is usually a mark of how well the character knows to speak to people and act in the proper politically correct attitude towards people, this certainly will help the character when seeking information. But as opposed to the previous two skills, this is something that usually is role-played, and not simply rolled as prior knowledge or a few hours walking and talking. This is more of an "on-screen" skill, and need the participation of the character and usually an NPC or two. Generally this is for asking for more in-depth information about something once you know what to ask about.
The Same Thing
So in essence, almost - they are "pretty much the same thing" in the sense that they will get you what you want...
Knowledge Local will give you the information instantly and take no time in-game. Gather Information will give you the information instantly but will take in-game time. And Diplomacy will require the player/character to interact with NPC's and will take both real time and in game time to finish.
Putting it together
My advise is to use a mixture of all of them, it even makes sense that all the characters would have some knowledge of a place, then they would walk around and learn some of the more gossipy information, and finally - once they have a basic idea of what the situation is, they will use their diplomacy skill to ask targeted question of specific individuals.
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In Pathfinder, the Gather Information skill has been subsumed into a use of the Diplomacy skill. It reads:
Knowledge: Local isn't about finding something out, it's about already knowing something. It's a standard-action check to already know something like:
Knowledge: Local is already knowing something. It's an Int skill, you can have it from just reading the newspaper a lot. Diplomacy is a people skill, you can know nothing about the town but you go out and ask other people to find out. So yes, you can get to the same information. Knowledge: Local is faster (hey does anyone in the party know where the thieves' guild is?) but if no one knows, you're stuck (no retries). Then you fall back to "Well I guess we'll go out and ask around," which takes a while and might get you stabbed but you can keep trying until a thieves' guild hit squad comes to make you stop.