Splitting is complicated. I believe exactly what you wrote until recently. Any color that splits can be used, but will not re-merge with a new color. So if virtue were to split, sure you might get red in the outcome, but it will not combine with blue from another dragon to make purple. I had a very hard time believing this but it really seems to be true. If someone can prove otherwise I'd be happy to hear it because I am still a little skeptical, but I've noticed that I can breed confidently and never get magic or virtue as long as I follow that rule!
I finally got a diamond dragon using Rainbow and Lily dragons!!
I got a diamond on my first try using tiny and vampire I figured I'm lvl 123 I should start trying for diamond and I sure was surprised to see that 44 hours! I was mainly trying to get some new pink hybrids xD
I got mine with a Planet and Cherry Blossom after many failures with lots of combos.
I just got mercury on my main account when using diamond X sea breeze trying for carnival, and immediately after I tried for carnival again with diamond X sea breeze and got my second 44 hr diamond!!! It's been over a year since I got my first diamond and any diamond hybrids, I can't believe I just got a diamond hybrid followed by a diamond!!!
still trying for red queen i used a different combo-fairytale/turkey.got a fruitloop,firemane then diamond