The set of all diagonal matrices with nonzero determinant is a normal subgroup of GL2(R).
I know you need to prove the conjugate in order for it to be a normal subgroup, but I am not sure where to go from there. I am thinking that this can be disproved. Do I just pick any diagonal matrix and another 2 x 2 matrix and plug them into the conjugate AHA^-1 to show the end result is not a diagonal matrix?
As you suspect, this is false (think about diagonalisable matrices that are themselves nor diagonal).
Let
$$A = \begin{bmatrix} 1& 0\\ 0&2\end{bmatrix}, \; P = \begin{bmatrix}-1& 1\\ 1& 0\end{bmatrix}.$$
Then $PAP^{-1} = B$ where
$$B = \begin{bmatrix}2& 1\\ 0& 1\end{bmatrix}$$
so we've conjugated $A$ to something outside this subgroup and it's hence not normal in $GL_2(\mathbb{R})$.