Disclamer: I have only been doing leather work as a hobby for about 9 Months, so take my words with a grain of salt.
I've been using good old 91% Isopropyl alcohol for diluting as I always have a ton of that stuff around here. I always dilute my spirit dyes at least 50%. Usually the ratios are more like 1-2 or 1-4 dye to alcohol. These days, I try to be somewhat methodical with how I work with dyes. I write down exactly what I did to get what color on what item, and with what leather. Every hide of leather is different, so you should always want to try out whatever you're doing on a small piece first. From talking with several people, everyone seems to have their own way of doing these things. Not sure if any particular way is "right". Usually the advice that most people have given me, is find something that works for me to get the look I want and just keep doing that.