Modeling the Diesel cycle in Excel involves creating a P-v diagram with four distinct states. Users can label these points with numbers instead of shapes. To do this, one can add data labels to the series on the graph. The process includes selecting the series, right-clicking to add data labels, and then individually selecting each label to modify it via the formula bar. However, there are challenges, such as ensuring that labels remain accurate if the data points change, as static text boxes may not move with the data. Some users have reported difficulties with the labeling process, indicating that it may require careful execution to achieve the desired outcome.