Its not really a good option for a diabetic cat, and I'm pretty sure the sugar-free ones wouldn't work even if they were safe which I suspect they aren't.
Having said that, if I remember right it took about 1/4 - 1/8th of a jolly rancher to coat a pill. You could do the math and decide how many calories that was, how much sugar that was, and compare it to say a dose of karo syrup used for hypos and get an idea of how much of a blood sugar spike you're talking about. If I was desperate enough and the cat was stable enough and the pills were important enough I might try it once and then test their sugar and see. But lets be clear - that would only be if nothing else worked and the pill itself was life or death.
The process was pretty simple - and I relate it here primarily for anybody who gets in this position with a non-diabetic cat. I took a small metal tin baking tin or corning ware type container. I'd then line it with the reynolds non-stick aluminum foil (very important step). Crush up 1 or 2 jolly ranchers into smaller pieces but not dust, add 1/2 - 1 teaspoon of water or so. Put in a 250-300 degree oven and keep an eye on it. As soon as it melts you use a spoon to stir it a bit and make sure its a thick caramel consistancy. Place another square of nonstick foil on a heat-proof surface and dump the candy out on it. Let it cool for a moment or so - to test how hot it is you can press a spoon to it and then touch the spoon quickly (or use a digital therometer). Grease your fingers a little and when its cooled down a bit and you can touch it you knead it one or two times and then break off little bits, flatten it out, put the pill fragment inside and press the disk around the pill and seal it tightly. Repeat. Store the pills in a sealed plastic container and don't try to make more then a few days worth at a time because they will get sticky.
The advantage to the method was to a. keep the pill from foaming in the cats mouth and prevent them from tasting it. And b. if the cat held the pill in the mouth the candy would melt a little and get slippery, that made it easier to rub their throat and coax them to swallow it and make it easier to swallow in general. And trust me before I did this with that particular cat I had tried everything I could think of including bacon fat, pill pockets, pill syringes and everything else listed previously by everyone. And not even this method worked 100% of the time, once she realized if she just waited even longer the candy would melt and she could spit it at me again - she'd try and wait me out. We managed to get her to swallow first about 75% of the time which was the best average we had with any method. Twice a day pills, for several months, life or death... until the liver biopsy proved it was hopeless. Then we just gave up and made her comfy.
I would suggest trying salami, smoked salmon, liver pate or liverwurst first. Or possibly bacon fat - can you buy slab bacon? You could cut cubes from just the fat portion and cut a slit in them and stuff the pill inside - voila, bacon flavored pill pockets. Just make sure if you use some sort of liver pate that you make sure it doesn't have onions or garlic in it because they're bad for cats. Good luck!
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