The violated assumption is independence of random variables across observations: repeated measurements on the same rat form clustered data. A persistent rat-specific weight difference induces positive within-rat covariance, even after adjustment for time and diet. Treating all 176 measurements as independent is pseudoreplication.
For the claimed lack of identifiability in the second fit, Rat must be a categorical variable, as intended by the rat-effect interpretation. Each rat receives only one diet, so this is confounding of nested fixed factors. If is the rat-indicator column, the diet- indicator is . Thus a diet effect can be increased by and every corresponding rat effect decreased by , leaving all fitted values unchanged. With an intercept, two diet columns, fifteen rat contrasts and time, there are 19 columns but only 17 independent columns: the intercept and rat contrasts already span the diet columns, while time varies within rats. This gives rank-deficient ordinary least squares.
The first model ignores within-rat dependence; the second cannot separate unrestricted fixed diet and rat effects. If Rat were instead encoded as a single numeric predictor, the asserted rank deficiency would not follow merely from nesting.