Of course Diwali is very much a North Indian festival but, leaving geographical considerations aside (as my mother was from the south, my father from the north). But I have never earlier really thought about the question.
I was forced to confront the question yesterday when a friend of mine, a prominent Indian professor, wrote to me as follows on receiving my Diwali wishes:
"Dear Prabhu, Thank you very much for the mail. I do not celebrate this festival as this is a festival that the Hindu celebrate for killing Naraka Suura, the great Dravidian king."
The professor is a Dravidian, so his sentiments are understandable. However, I had never come across such a strong anti-Diwali reaction earlier. I wondered whether he was simply an "eccentric professor" so did a Bing search, which revealed that Dravidians, Dalits and OBCs are now increasingly taking this perspective and such actions - see, for example http://www.tribuneindia.com/2011/20111025/delhi.htm#4
Anyway, here is my response to my friend: "I did not realise that you did not celebrate Diwali - but would it not be better to celebrate the death of Narakasuura (and Mahishasuura? And Raavana?) in the same way as Yesubhaktas celebrate "Good Friday" - though of course, the death of Jesus the Lord can be celebrated only because that had both a purpose and a resurrection - but you could name "your" festival as the "martyrdom of Narakasuura/ Mahishasuura/ Ravana" or the "Sacrifice of Narakasuura/ Mahishasuura/ Ravana" because he was willing to die rather than to surrender to tyranny? That way, you would still be able to celebrate but for your own reasons, in the same way as I celebrate Diwali as a follower of Jesus the Lord, the Light of the world....NOT joining in festivities seems somehow negative, whereas having your own name for a festival and your own reason for celebrating at the same time, seems somehow much more enlightened and positive (not to mention, FUN)!
By the way, I am reminded by my son Jyoti (working on his fourth novel, with which I think you will be very pleased) that "Naraka" is of course "hell" in the dominant Indian traditions (but literally "of man" = "of the people with the manly virtues"? - and therefore presumably "heaven" in your tradition?).
On the other hand, Asuras were originally the "wise and powerful" in the Zendavesta AND the Vedas (and continued to have positive connotation in the Avesta but came to acquire negative connotation in our dominant traditions..), presumably because the asuras were originally admired in the same way as Indians were admired by Europeans when they first came to India but later came to look down on us as we came to be ruled by them?
Jyoti and I were also speculating whether the term "asura" comes from the same root as "Assyrian" - these people were the descendants of Asshur, the second son of Shem and the builder of the greatest cities in the ancient world, according to the Bible - which would fit with the theory that the Dravidians/ suuras/ asuras built the great cities of Mohenjodaro etc - and would also explain why they were admired as "great and wise" - "wise" because you need wisdom to build cities, and "great" because of the power associated with them....