I think Sheik absolutely loses this matchup, and it's not another kinda even-45:55, it's a straight up 60:40 or possibly a bit worse lol. Coming from someone who plays both characters very often and play against other sheiks with diddy and other diddies with sheik etc. Good thing to keep in mind is Diddy absolutely beats Sheik in the air, if you jump, you're getting punished for it. This was true even pre-patch. His fair simply beats all our aerial options. Staying grounded is best. But here comes the problem: if you're grounded, and you're shielding their fairs, that's a free grab punish for them, and then you know what happens. Also on the ground his dtilt is extremely powerful.
I'd say the best thing to do would be walking and using ftilt smartly. Ftilt is easily the best thing we have in this matchup against Diddy, because it can punish fair on shield and sometimes beat his grounded options.
Getting banana in your hand is not good. It makes you unable to use your A moves and Sheik has a horrible item throw and doesn't get much from banana because of it. What you could do instead is throw it away or if you're at an advantage (as in, a stock advantage, % advantages don't mean much at all if anything) then camping with it and needles can be good but don't do it too much, cuz needles are easily punished, and camping with them makes you lose stage control cuz u'd have to be in the corner most of the time.
What you could do instead is punish diddy for bringing out a banana or trying to pick it up either in the air or from the ground.