The biggest issue, and the prime reason for dropping Diesel propulsion from the german perspective was not the weight of the plant nor the spacial requirements for their installation (Diesels are rather compact compared to boilers). KM ship designing practice required excessive length of the waterline to be put under armour in the "armoured citadel", so both, armour weight and space are no issue here.
The reason for this was their desired protection scheme, moving from all-or-nothing alike Panzerschiffe with inclined main belts to a more sophisticated system incorperating belt and armoured slope + splinterbelt /ATB schemes to fit their specific anticipation of intended battle ranges. This system required a rather low placed main armour deck, which in it´s own required excess stability charackteristics to make worth the tradeoff in more appaerent risk of the flooding of it´s wingtanks through penetrations of the main belt. Their armour system was not to make these ships invulnerable but to keep the embedded vitals intact from even short range belt-penetrating fire.
In order to attain large enough protected buoyancy and volume despite the low armour deck, the "armoured citadel" was taken intentionally further fore and aft than would be necessary.
Thus, Diesels would indeed fit nicely their choice of armour protection philosophy.
Another problem is definition. When Germany signed AGNA 1935, it eventually was bound to the definition limits of Washington and London naval treaties. These treaties defined that fuel oil was not to be counted in standart displacement but all weight of the engine was. This is what eventually killed the Diesel choice. Diesel propulsion is MUCH more economical but You will require more dead weight buildt into the powerplant. Since the fuel weight doesn´t count but the machinery weight does, the choice of lightweighted, high pressure, superheated boilers and turbines was made.
You need to realize that Diesel propulsion was indeed always LIGHTER than boiler/turbine if You factor in the weight of fuel oils/diesel. The Panzerschiff DEUTSCHLAND had just 4,962 t of machinery and fuel weight for a plant capable of producing 54,000 SHP design and a max range of 10,000nm at 20 kts. SCHARNHORST´s weight was 9,990t (including fuel oil) for a plant capable of producing 134,000 SHP design but a max range of only 6600nm at 19 kts. Corrected for identic range, the machinery + fuel oil weight of SCHARNHORST would have to be drastically increased, to ~14,000t, resulting in a specific weight of ~104kg/SHP for steam turbine and 92kg/SHP for Diesel plant´s with a design range of 10,000nm @ 20 kts.
Corrected for the higher (=134000 SHP) power of the SCHARNHORST´s, the DEUTSCHLAND´s plant (including Diesel fuel weight) would be 6,875t heavy, resulting in a specific weight of ~75kg/SHP for steam turbine and ~51kg/SHP for Diesel plant´s with a design range of 6,600nm @ 20 kts (same as SCHARNHORST).
But since the Treaties are ignoring fuel oil weights, the lightweight advantage of Diesel is gone. On any Washington displacement, a Diesel driven variant will be correspondingly less powerful than a boiler/turbine driven one.
Mixed propulsion plants were tried in the various interwar CL but none actually worked well. Part of the problem is that You can´t run the boilers cold. Thus, they need to be lit up in order to have action reserve, meaning that in actual service condition in wartime a relatively high fuel consumption unaccounted for in peacetime has to be factored in.