More Chords (Major scales)

I will try and explain making up chords on here BUT there is a fabulous video on YouTube called 'How to Make Chords from a Scale' presented by Karen Ramirez.

Let's take the scale of C Major (again - I keep choosing that because there are no sharps or flats :) ) and look at each note to make up the chords.

C D E F G A B C

C
E = Major chord (I)
G

D
F = minor chord (II) 
A

How do I know it's a minor chord? If the key signature was D Major, then the F would be F# but as it isn't it must be a D Minor chord (D minor has 1b in the key signature)

E
G = minor chord (III) (E Major scale would have a G#)
B

F
A = Major chord (IV)
C

G
B = Major chord (V)
D

A
C = minor chord (VI)
E

B
D = diminished chord (VII)
F

I think Karen Ramirez explains these really well (although she doesn't explain the diminshed chord VII)! BUT I have been looking at it! 

I was wondering what made it a diminished chord? I looked at my circle of fifths to check this out! Well this is the conclusion I've come to:

It can't be B Major - because the B Major chord would have a D# and an F# in it.
Ah-ha, I thought, it must be a B Minor - oh not it's not (I hear you cry)! It can't be a B Minor either because the F would have to be sharpened (F#).

a diminished chord is made up of 2 stacked minor 3rd chord! (i think i have that correct!)

If anyone can explain it more thoroughly - feel free to use the comment box below :)