Subject: Re: Diego Garcia
A 99 year lease. How'd that work out for us with the Panama Canal?

That's exactly the point. We didn't have a lease for the Panama Canal - we had total sovereignty over it. And that sort of arrangement ends up being very unpopular over time. Granting a lease or other right for a military base is a pretty routine thing that even first world countries do voluntarily. But having another country claim sovereignty over "your" territory over your objection ends up generating a lot of hostility. It's perceived as humiliating - that's only something that happens to weak countries - and is hated by your domestic nationalists, and those feelings are especially acute in former colonies. It becomes untenable over time in a way that leases, which are more voluntary and can be cast as arms' length agreements between equals, might not.

Did they ever really have sovereignty over Diego Garcia?

I'm not sure that's the right question, since Mauritius was one of the earliest areas to be colonized and had been so since the 1500's. Areas like that achieved their current sovereignty through struggles for independence, not restoration of some prior territorial boundaries. These old imperial/colonial holdings didn't have prior nation-states with fixed borders (for the most part) - so the process of decolonization and independence involved establishing borders, not restoring them.

The rules for decolonization were set out by the UN after WWII, and basically prohibited the colonial power from "holding back" choice bits of the former colonies when granting them independence. You weren't supposed to take a piece you wanted and forcibly remove the local population so you could keep it for yourself - you were supposed to grant all of the area under your colonial rule independence to the nation(s) that were being established. The ICJ (and later the UN) ruled that this territory was territory that should have been part of the territory of Mauritius, and that the UK violated international law by not transferring it over as part of their independence.