The diffraction limit is where effects start to be noticed and resolution drops, some of this can be recovered at least partially by judicious sharpening and requires pixel peeping at 100% magnification to even see. It certainly does not mean the image is suddenly unusable, it gradually becomes worse at smaller apertures. To be accurate it varies with pixel size, that is to say it noticed at wider f stops with smaller pixels.
As pixels get smaller they will eventually be smaller than the resolution limit of the optical system, so having smaller pixels does not increase resolution. The net effect is that as MP go up the aperture at which a loss of resolution can be detected gets larger. Conversely you should expect similar performance to a lower MP when you stop your high MP camera down into diffraction. Exactly how much varies with the lens you are considering and also the sensor - whether it for example has an anti-alias filter or not.
You need to consider this in relation to resolution loss when shooting through a dome. The premise behind developing wet lenses like the WWL and WACP is that the loss of resolution across the frame when using a dome is such that kit lenses behind a WWL/WACP can out-perform a top line pro wide angle lens behind a dome. The net effect for a lens behind a dome port is that the diffraction limit is noticed at smaller apertures than it is on land, due to the resolution loss of the dome/lens optical system swamping the small loss due to diffraction when it first starts to impact.
If you look at the lens test results such as what DXO mark publish you will also notice resolution of wide angle lenses is not that great. For example the Nikon 16-35 f4 lens is rated at 19 MP that is their data indicates it resolves no better than 19 MP so resolution will start to be a problem at smaller apertures than you might expect.