What do you even mean the 'lawful' usage of the term? You are imagining things that don't exist.
It wasn't 'diluted' by 'contemporary usage', it was never limited to your preferred usage in the first place. Many republics were considered democracies before America even existed.
From the OED:
In early use
democracy is usually associated with republicanism, esp. classical republics (such as Athens and Rome), republican states of early modern Europe (such as Switzerland, Venice, and the Dutch Republic), and later the post-revolutionary republics in France and the United States. It is typically used in (explicit or implicit) contrast with terms denoting other systems of government derived from classical Greek and Latin political terminology, as
aristocracy,
monarchy, and
oligarchy, and in these contexts often has negative connotations of disorder or anarchy (see, e.g., quots.
a1500 and
1792, and compare the early figurative examples at sense
1c). From the 19th cent., the term increasingly develops positive connotations of egalitarianism, freedom, and the rule of law (see, e.g., quots.
1836,
2011), and in the 20th cent. comes to be used more typically in contrast with systems of government seen as lacking in or inimical to those qualities (such as
dictatorship or
anarchy), describing both republics and constitutional monarchies.
It's not people calling America a democracy who are wrong, it is you insisting that it cannot be referred to as a democracy that is wrong, both in historical and contemporary usage of the term.