Xfce not starting

Yeah because DietPi does not offer GNOME, so you installed it on your own and the script can not detect it.

Your initial problem is also maybe bound to this:
https://dietpi.com/forum/t/hyper-v-autostart-dekstop-gui-not-working/20053/2

Can you share your logfile

cat /var/log/Xorg.o.log