The Diestel-Leader graph DL(q, r) is the horocyclic product of the homogeneous
trees with respective degrees q + 1 and r + 1. When q = r, it is the Cayley graph of the
lamplighter group (wreath product) ℤq ≀ ℤ with respect to a natural generating set. For the “Simple random walk” (SRW) operator on the latter group, Grigorchuk and Zuk, and Dicks and Schick have determined the spectrum and the (on-diagonal) spectral measure (Plancherel measure). Here, we show that thanks to the geometric realization, these results can be obtained for all DL-graphs by directly computing an ℓ2-complete orthonormal system of finitely supported eigenfunctions of the SRW. This allows computation of all matrix elements of the spectral resolution, including the Plancherel measure. As one application, we determine the sharp asymptotic behavior of the N-step return probabilities of SRW. The spectral computations involve a natural approximating sequence of finite subgraphs, and we study the question whether the cumulative spectral distributions of the latter converge weakly to the Plancherel measure. To this end, we provide a general result regarding Følner approximations; in the specific case of DL(q, r), the answer is positive only when r = q.