This is another article related to similar threads recently.  I posted
it because it is the most cogent description of what the researchers
think happened I have seen.  As to capsaicin, it was not the cure, it
was the agent chosen to destroy local to the beta cells nerves having
the action described in the article.  One might think that eating enough
hot peppers or even capsaicin to get the same effect would destroy much
tissue in all parts of the body.  The capsaicin was injected into the
pancreous.

http://www.diabetesincontrol.com/modules.php?name=News&file=article&sid=4412