It is neither, it is the one that we are using. The one from the Lord of the Rings universe. He has all of his powers save for immortality. Probably the one from near the end of the second age, before whats-his-face cut his finger off.
Just because he was a diplomat doesn't mean he wasn't also a fighter. That's like saying that elephants aren't big because they're usually gray.
The elephant thing is pretty silly. It's more like saying a firefighter isn't a kung fu master, he could be and might be, but his focus is in firefighting.
He isn't a fighter its pretty clear, he can fight well, but that isn't what his focus is.
sauron is badass in a fight, but i don't see how he could fight zedd, since zedd can just stay out of range and zap him with electricity.
Not only did he not lose that power (except for losing his shape-shifting), Illuvatar never did anything to him.
From the lotr wiki:
"Finally, [sauron] convinced Ar-Pharazôn to rebel against the Valar and attack Valinor itself. Eru (God) then directly intervened -- Númenor was drowned under the sea, and the great navy of Númenor was destroyed. The world was bent, so that thereafter only Elven-Ships could sail into the Utter West. Sauron was diminished in the flood of Númenor, and fled back to Mordor, where he slowly rebuilt his strength during the time known as the Dark Years.
From this point on he was unable to assume a fair shape, and ruled now through terror and force."
Illuvatar took away his power to assume a fair form, which pretty much takes away all his power to manipulate people (unless they are really stupid and think they should trust someone that looks openly evil), he retains his shapeshifting (he just has to look evil).
So yeah, Illuvatar did pretty much smite him and his armies (yeah it didn't kill him but it took away some of his powers)
He still has shape shifting though, as long as he turns into something that looks evil.