Hm seems like an IP conflict.
169.254 indicates that an DHCP server is trying to assign an IP adress to this interface.
Is it possible that Adguard acted as DHCP server and there are some leftovers of it?
Can you check your interface settings in dietpi-config > 7 : Network Options: Adapters
So I decided to clean things, and then removed Unbound (that I think adguard proposed to install) and PiVPN that was installed but not used. Then rebooted and it is working now.
root@DietPi:~# ip a
1: lo: <LOOPBACK,UP,LOWER_UP> mtu 65536 qdisc noqueue state UNKNOWN group default qlen 1000
link/loopback 00:00:00:00:00:00 brd 00:00:00:00:00:00
inet 127.0.0.1/8 scope host lo
valid_lft forever preferred_lft forever
2: eth0: <BROADCAST,MULTICAST,UP,LOWER_UP> mtu 1500 qdisc pfifo_fast state UP group default qlen 1000
link/ether b8:27:eb:a9:1f:20 brd ff:ff:ff:ff:ff:ff
inet 192.168.2.3/24 brd 192.168.2.255 scope global eth0
valid_lft forever preferred_lft forever
root@DietPi:~# ip r
default via 192.168.2.1 dev eth0 onlink
192.168.2.0/24 dev eth0 proto kernel scope link src 192.168.2.3
Thank you for your help and for this wonderful software.
hmm unbound as well is not creating interface entries. Maybe PiVPN did something. Strange thing because 169.254.0.0 is a link local address and will not be used for any communication.