Of course she was a Princess, she was just no Royal Highness anymore! Princess was even in her title after the divorce ("Diana, Princess of Wales"). Princess was not her only title. She was also the Duchess of Cornwall, a countess etc. So, if she was still alive they couldn´t have given the Cornwall-title to Camilla and had to make up something else instead!
I presume at her son´s coronation she would have worn something a royal Duchess would wear, a tiara and a coronet combined with a Duchesse´s train with its specific hermine rows and gold embroidery.
She was not a princess after the divorce.
Yes she was Diana, Princess of Wales which means she was the ex-wife of the Prince of Wales. Losing the HRH meant she lost the royal status.
She could have referred to herself as Diana, Duchess of Cornwall etc after the divorce - as that again shows that she was the divorced wife of the Duke of Cornwall.
That would not have stopped Camilla being HRH The Duchess of Cornwall as Camilla is the wife of the Duke of Cornwall.
Note the difference in the wording of the titles - first name and then title as opposed to the use of 'the' with a capital 'T'.
Go back to 1974 - HRH The Duchess of Gloucester's husband, The Duke of Gloucester died. For the next 28 years there were two ladies known as Duchess of Gloucester. The difference was that the elder was HRH Princess Alice, Duchess of Gloucester while the younger was, and is HRH The Duchess of Gloucester. If only one woman can hold a title at a time then Birgitte would have had to use a different title for those 28 years.
Earl Spencer's first wife was known as Victoria, Countess Spencer while his second wife was The Countess Spencer. At the same time, Raine, was also using Countess Spencer as the widow of Diana's father.
As soon as a wife is using their first name they are indicating they are either divorced, or widowed, and the title shows who her husband was. It doesn't stop another woman from using the title.
Add to that is the fact that even now there are two women who can use Countess of St Andrews - the wife of the actual holder of the title and the wife of the heir apparent who uses that title as a courtesy. The Duke of Kent's secondary titles - Earl of St Andrews and Baron Downpatrick are used by his son and grandson but they are still his titles. His wife, The Duchess, therefore is also The Countess of St Andrews and Baroness Downpatrick but her daughter-in-law uses Countess of St Andrews as a courtesy title to show she is the wife of the heir apparent to the Dukedom of Kent.