Database Diagram Dialog does not appear

Hi,
I am trying to simply create a database diagram on C# and add the tables I have made into it, however the dialog box letting me add tables does not appear and the 'Database Diagram' drop down along the top is grayed out.

I have seen this window - "This server does not have one or more of the database objects required to use database diagramming. Do you wish to create them?" and clicked yes, however the window does not appear and every subsequent new diagram I make just opens then sits there blank.

Any thoughts as to why this is happening?

I'm running C# 2010.