Diffused is correct, as in dilute. The HCl would be poured into a large container of water to partially neutralize it.
IMHO defuse would've been more accurate in this particular case.
Just for the record on this particular homonym
American Heritage Dictionary:
dif·fuse Audio pronunciation of "diffuse" ( P ) Pronunciation Key (d-fyz)
v. dif·fused, dif·fus·ing, dif·fus·es
v. tr.
1. To pour out and cause to spread freely.
2. To spread about or scatter; disseminate.
3. To make less brilliant; soften.
de·fuse Audio pronunciation of "defuse" ( P ) Pronunciation Key (d-fyz)
tr.v. de·fused, de·fus·ing, de·fus·es
1. To remove the fuse from (an explosive device).
2. To make less dangerous, tense, or hostile: a diplomatic move that defused the international crisis