Moose,
I wanted to offer you some honest advice since your situation seems very critical at the moment. I don't know what physician you have visited, but at this point it seems like whatever they are doing isn't doing you very good.
Like I said in my earlier post, the best way to tackle this problem is to:
(A) Have your physician's office run a CBC and pay close attention to the White count, being particular to whether the neutrophil (Indicative of Bacterial infection) or Leukocyte (Indicative of viral infection) count is high.
(B) Culture the wound, see what exact strand is affecting the site locally.
(C) Be aggressive and make sure that your physician prescribes both a strong broad-spectrum antibiotic the likes of Zyvox, that is one of the few antibiotics that can rid your system of bacterial strands as potent as MRSA, and a topical antibiotic cream.
(D) If you are indeed a diabetic (More so leaning on having Diabetes Mellitus), the odds of you having gangrene at that site is probably EXTREMELY high. You probably have heard this from your physician, but, if not, find out whether your injury can be classified as dry gangrene. Most patients that have Diabetes Mellitus tend to develop arteriosclerosis due to the clogging of arteries from plaque formed by the excess glucose.
Conclusively, if I had to make a diagnosis based just on the pictures provided and the little information that you have mentioned, I would lean on the fact that as a Diabetic, you probably developed dry gangrene at that site and over the course also picked up a localized infection that only exacerbated the situation. Truthfully, it looks like a combination of Dry Gangrene and MRSA at the site. The only reason why I am not certain is because with dry gangrene sooner or later the tissue tends to become black (necrotic), but that doesn't seem to be the case with you.
Either way, like I said before, CBC with a site culture followed with an antibiotic that is specifically effective against whatever bacterial strand is found at the site and then you can tackle it with some antibiotic ointment and dress it thoroughly on a day to day with such things like a Duoderm pad.
"1"