/u/k1990 and /u/RedHermit1982 previously evaluated the credibility of the cable here

I will attempt an answer as an amateur historian. Apologies in advance if this needs to get deleted.

Diplomatic telegrams (DIPTELs) are valuable to historians because, by and large, the embassy staff will tell it like it really is. It's a significant part of their job. Since Ambassador Donald was sending classified reports through secure means, he could give his honest assessment of the "ground truth" in the host country, without having to worry about the media or the general public getting a hold of the information - at least, not until decades afterwards. Diplomats will of course have their own biases, or perhaps a reluctance to tell their government something they really don't want to hear, but overall they're a trustworthy source. What I will say though is that if the UK government was thirsty for information, this raises the possibility that the ambassador felt under pressure to report what he had, regardless of its quality.

In 1989 the UK and other Western powers would have been desperate to obtain an accurate picture of what was going on in Beijing; DIPTELs would be an important conduit for any intelligence that came through. Since they still had Hong Kong at this time, you could say that the UK had a special interest in the situation, and one would hope that they would have used their established presence in the region to set up a decent information-gathering network over the years. But I don't know if this was the case (if the trouble Western powers had infiltrating the USSR is anything to go by, getting situational awareness of the PRC's internal affairs may have been very difficult indeed).

None of this is to say that the report is correct. It's only as good as the sources. And in this case, the bulk of the DIPTEL is based off reporting from one unknown (to us) individual, passing on information gleaned from a friend. Second-hand information is not ideal, even if the source has been reliable in the past. It is best practice to wait until the information is corroborated by at least two other sources before you act on it. If they're of different types - human intelligence, signals intelligence and so on - then all the better. The DIPTEL follows good procedure by outlining who the source is, but unfortunately there's no assessment from the Ambassador as to the veracity of the information he's passing on or how it fits into the wider picture. This DIPTEL represents just a small part of the reporting sent back to Whitehall during a chaotic and fast-moving situation. And my impression is that the most drastic elements of the report - like the 10,000 casualty figure - aren't backed up in the historical record.

In summary? If the diplomatic cable is genuine then the information would have been reported in earnest. But I would take the actual content with a pinch of salt until you have corroboration. The ambassador decided that the reporting was worth passing onto his superiors, but that doesn't necessarily mean he believed it to be true; that would be for the Foreign Office and the intelligence services to decide after reviewing all available information.

What does SMR and MR stand for exactly?

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