Why isn't it more diverse

Much of the official ethnic makeup of China is a drastic simplification. There are 56 official ethnic groups, of which the largest is Han. But take a look at some of these. The Hui as an officially recognised nationality — the way we think of them now — was only really a thing from Mao's time*. In his fight with the KMT, the CCP got support from many Muslim communities with the promise that they would have official recognition under the Communists. Not the only reason for said support, but it was there. The Gaoshan nationality, meanwhile, is the catch-all name for all of the Formosan aboriginals, of which Taiwan recognises 13 distinct groups. In China, they're all grouped into Gaoshan. This is actual the case for a great many of the nationalities, where multiple distinct cultures/identities/languages are groups under a single official nationality.

Why is such a high proportion of China Han

This is a simplification in the other direction, but not necessarily an unjustified one. It's an issue of degree. Take the Hakka for example. They are arguably a separate ethnic group with distinct culture (clothing, cuisine, etc) and language, but officially they're all simply Han Chinese in China. While there is a shared genetic heritage among Han Chinese, I would argue that it's the wrong level of focus if you're looking for diversity. It's the umbrella term that includes a great deal of cultural and linguistic diversity.

Hope that makes sense. Let me know if you want me to try to clear anything up.

---

* I don't mean to suggest that the term originated then. Nor do I mean that there weren't these Muslim groups at the time. Rather, the term 回 hui had a much broader meaning than it does under the current era, and wasn't specifically used in the focused manner it is today. The term is old, but was effectively redefined for the purposes of minority nationalities (少数民族) classification. Also, I realise someone might want a source on that, so I'm now tracking it down. Will edit when I get the link.

edit:

寧夏是紅軍西征的重要戰場之一。為了團結和發動廣大回族群眾對圍剿紅軍的國民黨軍進行堅決的斗爭，1936年5月25日，毛澤東以中華蘇維埃人民共和國中央政府主席的名義，發表了“中華蘇維埃中央政府對回族人民的宣言”。宣言中明確提出了“回民自己的事情，完全由回民自己解決，要保護清真寺，保護阿訇，擔保回民信仰的絕對自由”等。1936年8月，毛澤東派中共陝甘寧省委書記李富春來到寧夏同心，進行了豫海縣回民自治政府的籌建工作。1936年10月20日，豫海縣回民自治代表大會召開，在同心清真大寺建立了中國第一個民選的縣級回民自治政權——豫海縣回民自治政府，回族馬和福當選為政府主席。

That's a quote from a timeline published by the Ningxia Daily. Basically it's just talking about Mao's efforts to get the support of the Muslims in Ningxia for defeating the KMT in that region. Google Translate does alright with Chinese, for those interested in reading it in more detail.