why does my diplomat oven have a hole (by design) that goes from the
oven compartment straight out of the back of the appliance? And is
this normal / dangerous?

Ovens are intended to produce dry heat. A hole allows moisture to
escape so dry heat can create carmelization of starches and sugars
this produces the brown color. Most ovens I have seen have a vent of
some sort. At times it is useful to open the door slightly to allow
moisture to escape so carmelizing can occur.