For the Source Reconstruction i used the Diagonal noise covariance.
Why didn't you use a ful noise covariance matrix?
If you compute it from all the recordings (ie. selecting all the files at the same time), you should have enough data available for a correct estimation of the covariance, no?
Do i need to apply a baseline normalization on the Resting State Sources?
Maybe yes, but it depends what you are expecting to do with these files (See the recommendations section):
https://neuroimage.usc.edu/brainstorm/Tutorials/SourceEstimation#Source_map_normalization