Whenever you enter any situation where your goal is to negotiate, argue or convince another person or people your appearance is extremely important in you overall success.
Before you even open a speach you have already anounced your character, nature and even determined what is to be expected from you based on your stance, appearance and clothing.
Ceremonial armour is not functional but instead it is a statement of position, wealth, importance and an idication that the person who wears it either is or is contected too a powerful person.
There are many subtle factors in one on one negotiation, a dominant party is often established quite quickly based on a range of factors. Among others many people subcounciously adjust their perceptions, reactions and negotiation methods based on their impression of the other person.
If you walk into a negotiation in such a get up then you automatically convey your status and importance to all others present. You establish yourself as a powerful party, if even on a subcioncious level and ensure that all others present pay extra attention to what the "guy with the fancy armour/Suit etc " is wearing.
Dipomacy represents all the facets of negotiation and speach. Appearence and respect is one of them.
That is why ceromonial armour gives a +1 diplomacy bonus, or at least why i believe it should.