This is a beautiful phone. But it’s hamstrung by two words: Windows Mobile. While HTC is now becoming a coveted brand in its own right (think last year’s Touch), it’s reliance on the dudes at Microsoft is having a double-edged effect on perception of it.

Business people love it; they can get their Exchange mail on a handset that doesn’t look like they bought it down the local boozer for £10. But consumers hate it. Windows Mobile – it’s for business right?

Well, that’s not what Microsoft has been telling us, at least this year. Microsoft is pushing Windows Mobile to appeal to consumers too. That message was all over Barcelona’s Mobile World Congress in February. But there’s a problem – Windows Mobile still lacks consumer-focused niceties. No problem, said HTC, we’ll simply build our own front end on top of it.

TouchFLO was nice on the HTC Touch, and there’s no doubting improvements have been made with the Diamond’s TouchFLO 3D. Although it took a bit (well, ok, a lot) for us to get used to it at the Diamond’s launch yesterday, you’re supposed to be able to sweep left and right between apps and then up and down between items within the app, like digital photos or emails.

It works best for contacts – while photos is visually interesting when handled like this, it doesn’t make best use of the Diamond’s 2.8-inch screen. Likewise email. And if you click through to get a better look at your email, the list-based interface is quickly recognisable as pure old-school Windows Mobile.

But it’s oh-so-slow running on Microsoft’s system, and there are other limitations too – 4GB of memory in a handset that’s designed to compete with an 8GB iPhone and Nokia N95 and the 16GB N96. The 3.2 megapixel camera could also now be defined as mid-range.

Mind you, it has got the high-speed HSDPA data we all crave (a whoop-worthy 7.2 Mbps at that) and it does deal with the web surprisingly well. We saw it reflowing text when the screen is narrower than the paragraph you’ve zoomed into – very clever.

The HTC Touch Diamond is a great-looking handset. It’s far, far more pocketable than an iPhone, while the zoom dial is a nice feature after you’ve got used to it. The handset has a great design and feels the part – a worthy successor to the recognisable Touch.

It will also be available on all networks, meaning that you should rub your hands together with glee; deals will abound as competition is so open.