Britax convertibles require the mechanical recline mode position for rear facing, so you did good to switch it back to recline mode after experimenting with it, especially if your baby's head was slumping down toward his chin when you had it in upright mode. Per Britax, the mechanical upright mode is intended for forward facing only and not for rear facing installations.
The ped probably meant that it isn't necessary for an older baby with good head control to have the full 45 degree recline angle required for newborns or infants with floppy head control, not realizing the details of your convertible seat's recline mechanism, or just not fully clarifying his/her meaning.
It is possible to install a rear facing Diplomat in mechanical recline mode but still make it a more upright installation if you wish to tweak it a bit, but no more upright than 30 degrees. For example, depending on the vehicle seat's contouring, you might be able scoot the base of the Diplomat a bit further away from the vehicle seat bight (the crease where the vehicle seatback and vehicle seating surface meet) before tightening up the installation, and/or press down more on the portion of the Diplomat where the baby's feet dangle when you're tightening the installation to make it sit somewhat more upright. But definitely leave it in mechanical recline mode for a rear facing installation.