Sarah Fox , Mar 25, 2009; 01:36 p.m.
It's a bit hard to tell much from the photo posted, as it's small. A 100% crop would help.
I assume you 18-55 is the non-IS version. That's one of Canon's least sharp lenses. (The IS version is actually quite good, BTW.)
With all due respect to Dan, who knows a whole lot more about lenses than I do, diffraction limits are a relative thing. For your particular lens, which is somewhat soft, diffraction doesn't "worsen" the optical quality of the lens until maybe f/16. You'll probably get your best sharpness at f/8 and f/11. If you had the IS version, you'd start noticing the degrading effects of diffraction starting at f/11 or so, with f/5.6 and f/8 being your best apertures (in general). The same is true with your 60/2.8, which is a pretty sharp lens.
It's hard to debug your problem with the info given. You're going to need to do some well-controlled testing. Try this: Disable in-camera sharpening. Mount up your 60/2.8, with no filters on it. Put the camera on a good tripod. Enable the mirror lockup, and set the camera to the self timer mode. Set aperture to f/8 and exposure mode to Av. Put a ball or other object in your back yard, perhaps 20 ft from the camera, and focus on it. Take a test shot, and post a 100% crop here. This test will rule out camera shake and filters and will test focus accuracy. Also a 100% crop will allow people here to see if the sharpness is all that it can be. That's a start.