Maximum Diversion Time Definition=
based on limiting requirements
if you dont have large aircrafts you can use 120 minutes
but whole concept of max diversion time is to go beyond threshold time
depends on type of a/v engine configuration where they're going
depends on airplane manual too what they say about each engine about pressurization.
So all of it depends on many things.
for the A350 is 370 minutes (the most limiting) so they'll decide between 180 minutes and 120 minutes.
Part 2:
it's changed already now it's called EDTO not ETOPS
ICAO sets threshold time established by State of Operator. Threshold Time is variable (not set by ICAO)
EDTO (Extended Diversion Time Operations) = TLS (Time Limiting System)
Time Limited System bases your EDTO. Based on the Aeroplane's Flight Manual
When approving Max diversiion time for 2 turbine engine (annex 8)
1) reliability of propulsion system
2) airworthiness
3) EDTO