My DS7 suddenly comes up with an injury if he needs to go to time out or do something he doesn't want to do. It's a diversion tactic. He will scream at me that "I should be nicer to someone who is hurt!"
He also used to to throw tantrums that escalated into complete meltdowns when he was younger (he still does this sometimes). He also is telling me outright "no" if he doesn't want to do something.
I believe that DS suffers from some mild anxiety that contributes to the upsets. It sounds like your younger daughter's diagnosis has caused some fears for your eldest. She may also note that the youngest is receiving a bit of attention because of the diabetes.
My suggestions are not original- the only thing I can say for sure, is that my son is highly attuned to our reactions. He will eventually calm down, if I maintain an even tone. I would ignore the crying/whining. If she won't go to her room, I wouldn't force it. I've found that it escalates the situation, and I don't want DS to resort to hitting or running from me at age 7. Instead, I offer the choice between a lost privilege and a time out. He has 10 seconds to make the choice, then I remove the privilege.
If this doesn't calm down in a few months, you might have your daughter talk with someone. It sounds like anxiety and some related defiance.
