Hi Rhea,
My lovely younger daughter, who just turned 4, was the Queen of the Terrible Twos when she was that age. My parents wouldn't even babysit her, she was so bad! She would routinely have 5 or 6 knock-down, drag-out tantrums a day. Here's the thing. You just have to pick a few things - maybe 2 or 3 things - that you have rules about. These are the things that you feel like you absolutely MUST enforce, and your 2 or 3 rules might be different than mine. In general, I'd enforce No Hitting (biting, kicking, violence), No Screaming in Mommy's Presence, and You Have to Hold Mommy's Hand in the Parking Lot. That's it. All the other stuff, just let it roll off you like water off a duck's back. In other words, pick your battles. If she decided to be defiant and not eat her dinner, I just didn't care - eating dinner is not one of our rules. When I didn't react, more often than not, she'd stop being defiant about it and find something else.
That said, if and when my daughter broke one of our rules, I'd calmly, quietly pick her up and take her to her room. I'd plunk her down in the middle of the floor and say, "When you're feeling better, you can come out." and then leave. My theory is this - 2 year olds misbehave because they get worked up and just can't calm down. The time out in their room gives them a minute to themselves - and gives YOU a minute to yourself! - and in the long run this will allow your child to learn to deal with their own frustration without lashing out, because they learn what it means to get hold of themselves. I did not view it as a punishment, and I think that's an important distinction.
My other thought is, if your daughter is taking her diaper off in order to pee, potty train her. It's one less thing you'll have to fight with her about. I don't think there's any clearer indication that she wants to be out of diapers than her taking her diaper off!