A 1N4007 would be perfectly fine, and is probably what it actually is, regardless of mis-labeling
Presumably the diode is simply switched
IN circuit for low power (only using one half of the mains) and switched
OUT (actually shorted out) to provide full power, using both halves of the mains.
So the only two possible failure modes are:
1) Diode S/C - full power regardless of switch position.
2) Diode O/C - no power at all, regardless of switch position.
So
EXTREMELY unlikely to be a faulty diode.
As it takes 40W and 60W, that shows that the diode is working as well, as you get different powers accordingly.
I would imagine the most likely problem is the heating element, probably made of a number of elements in parallel, and some of those have failed.
You mention electric blankets- what do you do with faulty electric blankets? - you throw them away