Yes, just as the article in the Guardian says, there has been a small clinical trial, which shows some very promising results. As the article suggests it is premature to recommend people go on such a diet for this reason alone, and medical supervision on such a diet would be advisable.
The story is based around this paper:
Reversal of type 2 diabetes: normalisation of beta cell function in association with decreased pancreas and liver triacylglycerol, E. L. Lim & K. G. Hollingsworth & B. S. Aribisala & M. J. Chen & J. C. Mathers & R. Taylor. Received: 22 March 2011 / Accepted: 5 May 2011. Diabetologia DOI 10.1007/s00125-011-2204-7
They studied 11 obese patients with recently acquired Type 2 diabetes, who were put on a multi-week, 2.5 MJ (600 kcal)/day diets.
They had matched controls of non-diabetic patients who where not put on diets. (I haven't understood the value of a non-diabetic control.)
As well as significant weight loss, they found:
Normalisation of both beta cell function and hepatic insulin sensitivity in type 2 diabetes was achieved by dietary energy restriction alone. This was associated with decreased pancreatic and liver triacylglycerol stores. The abnormalities underlying type 2 diabetes are reversible by reducing dietary energy intake.
After a 12 week follow-up, 3 of the 10 patients available had returned to a diabetic condition.
The take-home message that the authors seemed to push in their paper is that this offers hope for what was thought to be an irreversible condition, and some inkling of the causes for diabetes, rather than a ready-to-go cure.