For the most part, Life is Strange: True Colors becomes a completely different game in Chapter 3: "Monster Or Mortal." Though the first part and last part of the chapter are more of what you've already done, the majority of the chapter is spent on the LARP that Steph set up for Ethan, temporarily transforming True Colors into a turn-based RPG where you have to worry about health bars and status effects and whatnot.
That doesn't mean there aren't inconsequential choices, though. There aren't as many as previous chapters, nor as many as in what is to come, but they are important all the same. Some will even lock you out of achieving the "good" ending. We've noted the relevant decisions you need to make below. As a final note: Chapter 3 is also where True Colors really starts hammering home on how Alex feels about music, herself, and Ryan and Steph. Be on the lookout for opportunities to dig into those areas.
Either choice in this scenario works out for you. The major influence of this choice ties more into whichever romance you want to pursue (if you want to pursue one at all). You're not really picking who you think would be better to distract Diane, you're picking who you think is more attractive and thus more distracting for Diane. So if you want to romance Steph, pick her; if you want to romance Ryan, say that he should be the distraction.
Do not tell Riley about Eleanor if you want the "good" ending of True Colors. Doing so will prove to Eleanor that you're not a trustworthy person, and you need her trust to get the "good" ending. That said, going this route will ensure that Eleanor remains alone as Riley will go off to college, so prep some tissues.
On the surface, this seems like a no-brainer. Charlotte's anger stems from the grief over Gabe's death, her disappointment in Ethan for having a part in Gabe's death, and her self-hatred at herself for blaming her son for the death of her boyfriend. She's contemplating suicide, so why not take that anger away?
The answer, as Alex puts it, is that doing so will fill Alex up with that rage instead. But there's a greater question at play here: As destructive as this rage is, isn't the act of feeling it just as important and valid as coping with it? Anger can be destructive, but it's an important part of healing too.
In this particular instance, taking away Charlotte's anger is the wrong way to go. It will make Alex so angry that she'll push away her allies, Ryan and Steph. More importantly, it will prevent Charlotte from fully grieving and achieving a healthy emotional equilibrium--removing her anger will transform her into a husk of a person. She will no longer aid you in your attempts to take down Typhon, locking you out of the "good" ending.