asalcedo wrote:
I've purchased a Dewalt D21580K dedicated dry diamond drill.



OK

The manual insists on using the DeWALT D215804 Dust Collection Device
when dry drilling.

snip
I will try without it, but is it that important? I really do not
understand how it can collect much dust being so far from the actual
cutting.


I imagine it sucks the dust from inside the core drill.

Would the end of a vacuum cleaner placed by the hole be any better?


It would be different, as it would suck dust from outside the core
drill. Just as effective I would think, but who's gonna hold the vac?
You need both hands on the drill.

Also, the manual insists on using a stand for dry drilling above 100mm.



Well, it would, wouldn't it? They don't want to be sued if someone
breaks their wrist.

'- Search Results : Industrial Power Tools from DeWALT, Ryobi, Bosch,
Makita, AEG, Hitachi, Milwaukee & Panasonic'
(http://tinyurl.com/2g2j76m)

Would it be really needed for drilling 127mm holes in breeze block and
perhaps in masonry?


Depends on horizontal/vertical, whether or not cramped conditions,
whether or not above your head, whether you're a 10 stone weakling or a
20 stone bruiser, how hard the material is, how deep the hole is,
whether or not you have steel toe-capped boots and whether you fancy it
or not.

In other words, give it a go if you fancy it - you'll soon know whether
you can physically cope or not.

HTH
DaveyOz