[proofplan]
The [discrete metric](/page/Discrete%20Metric) turns every nonzero distance in $X$ into the single value $1$. Thus a Lipschitz bound for $f$ is exactly a uniform bound on all distances $d_Y(f(x),f(x'))$ between image points. One direction uses the Lipschitz constant as a diameter bound; the other direction uses the finite image diameter as a Lipschitz constant, with a harmless positive replacement if the diameter is $0$.
[/proofplan]
[step:Use a Lipschitz constant to bound the image diameter]
Assume that $f$ is Lipschitz. Then there exists a constant $L>0$ such that for every $x,x'\in X$,
\begin{align*}
d_Y(f(x),f(x'))\leq L\,d_X(x,x').
\end{align*}
Let $y,y'\in f(X)$. By definition of the image, there exist $x,x'\in X$ such that $y=f(x)$ and $y'=f(x')$. If $x=x'$, then $d_Y(y,y')=0$. If $x\neq x'$, then the definition of the discrete metric gives $d_X(x,x')=1$, and the Lipschitz inequality gives
\begin{align*}
d_Y(y,y')=d_Y(f(x),f(x'))\leq L.
\end{align*}
Therefore every pair of points in $f(X)$ has $d_Y$-distance at most $L$. By the definition of diameter,
\begin{align*}
\operatorname{diam}_Y(f(X))\leq L<\infty.
\end{align*}
If $X=\varnothing$, then $f(X)=\varnothing$ and $\operatorname{diam}_Y(f(X))=0$ by the stated convention, so the same conclusion holds.
[/step]
[step:Use finite image diameter to construct a Lipschitz constant]
Assume that $f(X)$ has finite diameter in $Y$. Define
\begin{align*}
M:=\operatorname{diam}_Y(f(X)).
\end{align*}
Then $M<\infty$ and, by the definition of diameter, for every $x,x'\in X$,
\begin{align*}
d_Y(f(x),f(x'))\leq M.
\end{align*}
Define the constant $C:=\max\{M,1\}$. Then $C>0$ and $M\leq C$. We prove that $C$ is a Lipschitz constant for $f$.
Let $x,x'\in X$. If $x=x'$, then $f(x)=f(x')$, and hence
\begin{align*}
d_Y(f(x),f(x'))=0=C\,d_X(x,x').
\end{align*}
If $x\neq x'$, then $d_X(x,x')=1$, so
\begin{align*}
d_Y(f(x),f(x'))\leq M\leq C=C\,d_X(x,x').
\end{align*}
Thus for every $x,x'\in X$,
\begin{align*}
d_Y(f(x),f(x'))\leq C\,d_X(x,x').
\end{align*}
Therefore $f$ is Lipschitz.
[guided]
Assume that the image $f(X)$ has finite diameter in $Y$. We name this finite bound:
\begin{align*}
M:=\operatorname{diam}_Y(f(X)).
\end{align*}
The definition of diameter says that $M$ is a uniform upper bound for the distances between all pairs of points in $f(X)$. Since $f(x)$ and $f(x')$ belong to $f(X)$ for every $x,x'\in X$, we have
\begin{align*}
d_Y(f(x),f(x'))\leq M
\end{align*}
for every $x,x'\in X$.
To prove that $f$ is Lipschitz, we need a constant multiplying $d_X(x,x')$. Some definitions allow a Lipschitz constant to be $0$, while others require it to be positive, so we choose a positive constant that always works:
\begin{align*}
C:=\max\{M,1\}.
\end{align*}
Then $C>0$ and $M\leq C$.
Now let $x,x'\in X$. There are two cases, and this is exactly where the discrete metric is used. If $x=x'$, then $f(x)=f(x')$, so
\begin{align*}
d_Y(f(x),f(x'))=0.
\end{align*}
Also $d_X(x,x')=0$, hence
\begin{align*}
d_Y(f(x),f(x'))=0=C\,d_X(x,x').
\end{align*}
If $x\neq x'$, then the discrete metric gives $d_X(x,x')=1$. The finite diameter bound gives
\begin{align*}
d_Y(f(x),f(x'))\leq M.
\end{align*}
Since $M\leq C$, we obtain
\begin{align*}
d_Y(f(x),f(x'))\leq C=C\,d_X(x,x').
\end{align*}
In both cases,
\begin{align*}
d_Y(f(x),f(x'))\leq C\,d_X(x,x').
\end{align*}
This is precisely the Lipschitz condition for the map $f:X\to Y$, so $f$ is Lipschitz.
[/guided]
[/step]
[step:Conclude the equivalence]
The first step proves that every Lipschitz map $f:X\to Y$ has image of finite diameter. The second step proves that finite diameter of $f(X)$ supplies a Lipschitz constant for $f$. Hence $f$ is Lipschitz if and only if $f(X)$ has finite diameter in $Y$.
[/step]