From what I understand (not a breeder, work with rescues but study them a lot LOL!) dilute means basically as its name states, dilute, meaning that the body color is paler than that of its counterparts. It depends on whether it is a recessive or dominant gene in the bird as to whether it will effect the coloration of its offspring. If I remember correctly even one that is showing the dilute coloration could actually have a recessive dilute gene. If a dilute recessive is paired with another that caries the dilute gene there is a great chance it will be passed onto its young. If it is dominant dilute then there is a great chance it will passed onto its young whether paired with a dilute or not. If it is recessive and paired with a non-dilute then the offspring will most likely not show any dilute coloring. Hope I got that right LOL! Now as far as the other color mutations and the offsprings coloring I can't be much help but this page should help you answer your questions.
parrotlet color mutations and breeding

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