Most of the world's armed forces- including those of the US, Canada, Mexico, Great Britain, and Australia- do not accept diabetics on insulin, although those diagnosed while they are already in the army may or may not be allowed to stay- if they do stay they are usually moved to noncombat positions.
In Israel, where army service is compulsary for most people, type 1 diabetics are given the option of joining the army or not. The evidence from those who have chosen to join the army is that they are capable of serving in the army well, and that they generally have good diabetes control while in the army. They are generally not assigned to combat, but still undergo things like basic training. The Israeli army has two pilots with type 1 diabetes.
Right now the only other country I'm finding that accepts diabetics is Finland, but I believe that there is an African country that also accepts diabetics into its armed forces.
This article has a pretty decent summary of the current situation: http://dvd.sagepub.com/content/8/2/55.full.pdf