Great, thank you for that insight. But you can see how this is still only a workaround. And it is still a costly workaround, having to open one more dialog and configuring it, when all I want is to re-layout my graph. It's pretty roundabout.
And it still leaves me having to manually size the diamond/ellipse nodes every time I add or edit them.
Beyond all that, the fact remains that "Fit Node to Label" does not properly resize ellipse and diamond nodes to fit the text. The text doesn't have an aesthetically pleasing distance from the edges of the node, and on occasion the text even spills out of the node. Workarounds or no workarounds, the problem that I'm reporting is that the Fit Node to Label is broken when it comes to certain non-rectangular nodes.
The solution seems simple: first find the bounding box for the text, complete with padding, like you probably do anyway (I submit as evidence for that the fact that the algorithm works for rectangular nodes), and then resize the diamond/ellipse so as to inscribe that bounding box. These are straightforward tweaks to the mathematical formulas for the ellipse radii or for the diamond diagonal(s).