Diss is a very informal slang term, which I believe arose out of African-American Vernacular English. While it is, in fact, short for disrespect, the definition of disrespect in question is not the one typical to mainstream English. This transitive verb disrespect in AAVE does not mean merely failing to show proper deference for another's dignity: it means to be deliberately rude to someone to express contempt for them.
You might get more accurate usage if instead you mentally translate diss as disparage or insult. This latter choice is particularly felicitous, as it, like diss, can function either as a transitive verb, e.g. Don't you diss/insult me! or as a noun, e.g. Was that a diss/insult?
Some free advice: as a heuristical rule of thumb (i.e. not an always thing, but a good way to bet), assume that whenever a white Westerner talks about anything having to do with respect, honor, face or similar concepts -- and diss certainly qualifies -- there is a subtext that has to do with race or class. So while diss is not an offensive term and isn't hard to use grammatically correctly, it may invoke undesired issues and associations, if you don't know what you're doing with it.