Quotes from the D3 Dev AMA

[Quark]

Long ago when I swapped in Tele/Fracture I loved it so much I attempted to swap Mirror Image in instead of Diamond Skin. Unfortunately it just doesn't work as a quality defensive skill. Tele/Fracture works so well because, as you said, it has both defensive and offensive traits allowing you to use it for different reasons. Mirror Images without the utility movement of Teleport just don't end up working the same way. Often times even after Mirror shifting all of the mobs will still focus you and without the benefit of the added distance that Teleport offers it is nearly impossible to get them to shift attention to the Mirrors. I've yet to find a consistent use for them after a fight has been initiated and thus they will never have as much use as Diamond Skin from what I can tell.

Mirror Image used standard defensively requires a different mindset, and acknowledging their AI strangeness. I've only really used the +2 Images rune. The images will end up behind you, unless they engage a target. How they engage seems to be based off primary skill. Certain skills they cast (Arcane Orb), others they melee instead (Disintegrate). I can get up close, then run back, and the images will all be attacking targets and distracting them. Doorways are amazing for this. Illusionist adds more to the cycle. Oh, he still hit me? Okay, try again. It's finicky, but as I spend more time practicing it I'm getting more reliable at the images working for me. Also, I've used it to decent effect for distracting the enemies from coop players sometimes. Blocking projectiles with images is also very fun.

Beyond the standard "this helps me kite", certain mods on bosses also make Mirror Images really attractive, and this is why I've kept them.

Waller: Teleport's great, but sometimes a waller champ pack goes nuts. Add more targets to take less hits while escaping.
Electrified: They eat lightning!
Mortar: If you're kiting mortar, they'll end up in between you and the enemy, and will get targeted first giving you more breathing room. If you're staying in the dead zone, more targets to lower chance of being hit.
Vortex: Cast just after a vortex, to reduce incoming hits.

Jailer: Save the best for last. Mirror Images breaks jailer. I have seen some amazing boss combos involving Jailer. Vortex/Jailer/Arcane/Plagued, for instance. Basically when I see Jailer and I have Mirror Images, I think "this fight would be a lot harder without MI".

So with the way I use it, there's really two caveats to Mirror Image. First, you have to be able to take a hit or two. If you are you can greatly increase the chance of the images attacking on their own and distracting the enemy. Second, which side you end up on is random. Yes, this has killed me. I grew accustomed to using Mirror Image to block The Butcher's chain grab. One time MI put me closer to it, instead of further away with an image blocking the way.

There are some things I miss Diamond Skin for - #1 being reflect damage and #2 being certain "whelp, this is gonna hit me" times (mostly Butcher). Mainly I think it's two different playstyles, though: do you want to take a hit for zero damage, not move, and kill something fast. Or do you want to take some hits occasionally, get away, and distract something.