Driving around town (London) I get around 35-40mpg so long as it's not stop start traffic. And thats in an Audi A4 Avant with a 1.8 20v (non-turbo) petrol engine.
Diesels make sense on longer journeys, they also aren't as efficient till they've been running for 10-15min, so if you only do short journeys, then it's no better than petrol.
If you can car share, then that sounds like a good option.
Is your insurance for 3rd Party Fire and Theft or fully comp ?