F4LL0UT: It's misleading to divide the people involved into the guys with the idea, "Blizzard" and the people who made the game that we finally got. Honestly I don't know who approached Blizzard with the ideas you're describing but Erich and Max Schaefer did work on Diablo and they worked on Torchlight. There's nothing wrong with stating that people from the original Diablo team made Torchlight.
Export: Condor are the original team, the ones who became Blizzard North when Blizzard "adsorbed" them. They wanted to make a turn-based dungeon crawler with claymation graphics, like Clay Fighter. Blizzard liked their stuff, but thought it should be real-time and not have claymation graphics. Some of the people from Condor (Blizzard North) went on to create Torchlight. Blizzard North were tasked with developing Diablo 3, but what they came up with was seen as bad in some way (make of that what you will) so development was moved elsewhere.
Isn't Blizzard Irvine all the remains now? i.e. all of the various parts of Blizzard that made their wonderful products in the past (the original Warcraft series, the first two Diablo games, the first Starcraft game, and their early titles) have since been replaced by Blizzard Irvine (World of Warcraft, Diablo 3, Starcraft 2). I haven't played Starcraft 2, but the forced online thing really sucked about that. And same issue with Diablo 3 along with the RMAH (real money auction house). Kinda sad, really. They've 'WoWified' their product lines, and they probably have no plans of backing down from that 'everything should be an MMO' mentality. Oh well.