Do you think "diffuse power" would work?
Thomas Tompion has said earlier that it would.
Does it mean small local governments to have more power and the central govt. less, or the populace to have more power than they currently have?
It depends on how it is done. Diffusion can take many forms. You would have to delineate how the diffusion should occur.
Am I right that Spread out the power means "small local governments to have more power and the central govt. less"?
No, it doesn't. The power could be spread out within the central goverment.
Am I right that Delegate the powers to several offices or groups means "the populace to have more power than they currently have"?
Unlikely. In my post, "Depending" started a new thought. There is no connection in meaning between the phrases above and the questions below that sentence. Further, these were just two possible questions.
I thought of the word "delegate" because of the oversight committee you mentioned in an earlier post. That committe would 'delegate', assign power, to several different places. "Delegate" in and of itself does not suggest diffusion, spreading out, etc. The rest of the phrase is necessary for the meaning to be clear that the power is being spread out. The problem inherent in having an oversight committee such as this is that it in turn would have a concentration of power.
Orange Blossom