Don;t know much about LQG, but assuming it is constructed along the lines of a normal quantum theory...
gauge invariance tells you how to build your theory. You impose gauge invariance, and that gives you a guide as to how to procede. In order to do a calculation, though, you have to pick a gauge---so you use gauge invariance as a tool to write down a langrangian, or something, then you destroy gauge invariance to do calculations. So in a sense gauge invariance is not physical.
Without the gauge invariance, you could still construct a lagrangian. No problem at all---it is still possible to build a theory and write down a lagrangian. This lagrangian will correspond to something that you would have gotten after you chose a gauge in the previous problem.
The diffeomorphism invariance is just the statement that the answer shouldn't depend on the coordinates you use to describe it. It is another type of gauge invariance, in a sense. You write down a lagrangian, given that you have diffeomorphism invarinace. Then you choose a set of coordinates to do calculations.
In answer to your second question, no. But you CAN construct inner products.