Welcome, Lynn! Don't be discouraged! Bandit has been diabetic for over 7 years now, and he's still doing great--just as healthy as any non-diabetic cat. If you follow the right guidelines for treatment (a low carb, canned only diet, a good insulin like Lantus, Levemir, or Prozinc, and dose adjustments via daily home testing), many cats go into remission and don't even need shots any more. Bandit needed to be on insulin for a little while last year because he needed steroids, but he's back off it again. Before that, he hadn't needed insulin for a good 5 years!
The dry will cause problems with regulation, but definitely don't remove it from her diet until you are home testing! Diabetic cats can see a 100-300 point drop in their blood glucose levels once the dry is removed, and some cats (about 25%) no longer need insulin once the've switched to a low carb, canned diet. The rest usually need insulin for a period of time but most go into remission.
I always have given Bandit's shots while he's eating, and he never even notices that I'm doing it. The shots don't hurt her--you're only injecting into the skin, not the muscle. What she doesn't like is that you're doing something new and strange to her, and she can sense that you're nervous and upset about it. Try doing the shots in conjuction with food or a special treat every time, and your attitude also makes a huge difference! If you're stressed out and upset, she will be to, but if you're calm, relaxed, and matter of fact about it, she will calm down, too! I learned this the hard way my first few weeks after Bandit's diagnosiss.
It's the same thing with the home testing--it doesn't hurt the cat at all (cats have less nerve endings in their ears than people do in their fingers), it's the strangeness and your stress that freaks them out. If you give a diabetic safe treat with each test, even the most fractious cat will accept the testing in time.

Once I was less "Oh poor baby, I'm so sorry I'm hurting you!" and more "You're getting this test/shot. cat, whether you like it or not because you need it to save your life!", everything got ten times easier.