The rod-pinch diode is being successfully fielded as a bremsstrahlung flash x-ray source at 2 MV on the Cygnus accelerator. Ideally, at peak power, electrons emitted from the cathode are magnetically insulated and travel parallel to the rod until they pinch onto the rod tip, generating a small x-ray source. However, x-ray production has also been observed at the base of the rod, degrading the radiographic performance. To determine the cause of this secondary x-ray source, particle-in-cell simulations of the Cygnus diode are performed in 2D which includes plasma formation along the anode rod, material-particle interactions, and photon production. Plasma is modeled using a hybrid technique which enables simultaneous modeling of a dense (~10 18 cm-3) electrode plasma and the lower-density (10 13-10 15 cm-3) electron and ion populations associated with bipolar diode currents. The results show a more realistic diode impedance lifetime as compared to simulations without plasma formation and photon production at the rod base, for a particular rod configuration.