Can't pipe into diff?

Try to use - to represent the standard input.

ssh user@remote-host "cat path/file.name" | diff path/file.name -

Here's one workaround: diff seems to accept <(expr) as arguemnts:

diff <(ssh \"cat path/file.name/") <(cat path/file.name)

Piping into diff is equivalent to running

diff path/file.name

and then, once it's running, typing the entire contents of the file.

As you can see, that's not what you expected.