It is essential that she be allowed to drink when thirsty or you may have further problems!! Kidney problems come to mind. I do not know why your father is not supposed to drink alot, but humans and cats are different, and I know nothing about human diabetes.
You can best help your cat right now by going to the felinediabetes.com and reading all you can about feline diabetes. I have a flyer on my website which contains the best URLs for newly diagnosed diabetic cats. Go to http://www.sugarcats.net/sites/dmstrickland
You will learn about FAQs, hypoglycemia, ketones, and hometesting just to name a few things.
You can also help by learning to hometest your cat's blood glucose like a human diabetic tests theirs. Your vet will probably be against this, there have been some articles in vet journals stating that the cats end up hating their owners, but it's just not true. My cat objects to the insulin shots much more than the earpricks. Yes, earpricks. There is a tiny vein that runs along the outside of the ear. You do not prick this, you go for the area between the vein and the edge of the ear - you will find the URL for the hometesting sites in the flyer.
Your original question was about urinating outside the litter box - yes, this is common for a number of reasons -
1. They can't get there in time - solution - more litter boxes.
2. They have neuropathy from uncontrolled diabetes - solution - get the diabetes under better control (with hometesting), and get vitamin supplements to help.
3. It's a cat thing - some cats just urinate outside the litter box because they don't like to get their feet wet, and with the diabetes, they usually pee puddles. Solution - get the diabetes under better control.
I most strongly advise going to felinediabetes.com and reading. There is also a message board over there where you can post this question - there is a wealth of knowledge out there.
As far as your vet is concerned - most vets can be considered general practitioners - that is they need to know a little about a lot of diseases. They are not specialists, and diabetes is a complicated disease and the treatment is evolving, and most vets are not yet up to date with the latest changes. What kind of insulin are you using? How often do you give injections? Has your vet done a bg (blood glucose) curve and what were the results? What type of diet is your cat on? All of this affects the bgs and how your cat feels. Are you monitoring using ketodiastix in the urine? It does not give a great picture because it only tells you what is being spilled into the urine since the last time the cat urinated. It does not let you know how high or how low the cat goes, or for what length of time the cat is in an "undesirable" range. You need to educate yourself and take over the monitoring of your cat to be able to report things to your vet. Or if you are not comfortable with your vet, there is a site at http://imom.org/vets/referrals.htm
which lists vets recommended by patients. (It is not a site that vets pay to have their names listed - you only get on thru recommendation). Also, to check by geographical location, you can try http://catandmouseclick.home.mindspring.com/