Why are they special? Because at one point it was a big deal to use dim 7th chords to modulate to different keys. With that one chord, you have access to three other keys (major or minor), or if you use them as a viio/V, another three key areas. Lots of possibilities. At least that would be one reason.
Diminished scales are alternating whole and half tones. There are only two -- It either starts with a whole tone or a half tone. I'm fuzzy on this now. I think there are also called octatonic. The notes of the dimished chord "fit" into the diminished scale -- So you can play notes of the diminished scale over a dminished chord and they should sound good. I think that's the basic idea. It's more a jazz thing I think.
(I'm fuzzy on my theory on why the seventh of the dim seventh isn't in the major scale. Either way, it would resolve down to the 5th step of the scale I would think.
There are slash chords, but I'm not sure it's helpful to think of a dominant seventh chord as a dimished chord with an extra note as the root.
Why are they special? Because at one point it was a big deal to use dim 7th chords to modulate to different keys.
they all invert into each other perfectly (Co7 = Eb07...)
what other modulating chords can be used to change keys?