It might be a glitch in your game, maybe try it in another save file.
I got it to work like this:
1) Select the diagonal foundation tool and click-and-drag a foundation (remember friezes cannot be placed on the ground level, they need to be placed on top of a level of foundation or wall)
2) Open the cheat console and type in the cheat for friezes (placefriezes on)
3) Reselect the diagonal foundation tool (I have to select something else, anything, and then reselect the foundation tool for the frieze cheat to work)
4) Now click-and-drag your diagonal frieze on top of your foundation/wall
As always, don't forget to turn your cheats off when you're done.
