A couple of reasons I think diffraction has more of an effect than it first seems it should:
1. Light enters the lens at more angles than just perpendicular to the diaphragm. Entering at an angle, your 1mm hole becomes a smaller slit -- the farther from perpendicular the angle, the smaller the slit becomes.
2. Light travels as a wave, which means light heading near the edge of the 1mm hole will be affected, not just the light headed directly at the edge.
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