60% seems a bit harsh to this former algorithms TA -- you gave the correct algorithm and identified the extremal cases for the two inequalities. Nevertheless, I agree with amit that you needed to give a formal proof. If your graders are particularly strict, you might have needed to say a word or two as well about why your algorithm is linear-time.
Here's the start of a formal proof. Let d(v, w) be the minimum length of a path between vertices v and w. The diameter is defined to be D = max_{v, w} d(v, w). Your algorithm chooses an arbitrary vertex s and outputs X = max_{w} d(s, w).
You need to do a little bit of algebra to show two facts: that X <= D and that D <= 2 X. You'll need the triangle inequality d(a, b) + d(b, c) >= d(a, c), which holds for all vertices a, b, c, as well as the symmetry d(a, b) = d(b, a).